AIG Could Repay U.S. in 3 to 5 Years, Chief Tells Congress
Thursday, May 14, 2009
Edward M. Liddy, American International Group's chief executive, said yesterday that he believes that the beleaguered insurer could pay back the federal government's massive investment within several years.
"It will take somewhere between three to five years," Liddy told the House Committee on Oversight and Government Reform. "There's great opportunity for the taxpayer to be repaid."
Since September, the Treasury and the Federal Reserve have committed about $180 billion in cash and loans to saving the company.
But Liddy's estimate came with a caveat, a variation of which he repeated again and again. "It is heavily dependent on what happens with the worldwide economic situation," Liddy said. "We are not an island." He said the company's bottom line rises and falls with the market for its wide-ranging assets, which span from mortgage securities to airplanes.
Liddy last visited Capitol Hill two months ago, amid the nationwide uproar over $165 million in retention payments to employees at AIG's Financial Products division, the troubled unit whose complex derivative contracts nearly wrecked the global insurance giant.
The ire he encountered during that appearance had mostly vanished by yesterday. Lawmakers who had earlier seethed seemed merely skeptical about AIG's prospects for survival and its openness.
"Is AIG, in effect, a giant sinkhole?" asked Rep. William Lacy Clay (D-Mo.). "It appears investors are simply propping AIG up."
"I think we have a good plan," Liddy responded. He outlined a future in which AIG would pay back taxpayers and "emerge as a much smaller, more nimble company." He pledged that "the Financial Products unit will not exist." He noted that "we have reduced, but not eliminated, the systemic risk that AIG presents to the global financial system."
While Liddy experienced a warmer reception yesterday, he didn't escape unscathed. Lawmakers returned over and over to the issue of bonuses at AIG, seeking assurances that no similar controversy lies ahead. They also inquired about a bevy of lawsuits involving AIG, the company's ongoing quarterly losses, its billions of dollars in payments to various counterparties and its use of high-dollar public relations firms. Liddy was grilled about whether his former position on the board of Goldman Sachs and his continuing investment in the company pose a conflict of interest because of that firm's tangled financial relationship with AIG.
Lawmakers also probed Liddy about the particulars of Project Destiny, the company's detailed plan for the future, which has been shared with Fed officials but not yet with Congress. Liddy outlined the broad objectives of the plan but hesitated to provide specific operating details, saying that AIG's competitors could exploit that information.
Also yesterday, the three trustees appointed by the government to represent taxpayers and exercise their 77.9 percent stake in AIG emerged for their first public appearance, saying they intend to seek an imminent shake-up of the company's board of directors.
The trustees are Chester B. Feldberg, a former senior official at the New York Fed and a former chairman of Barclays Americas; Douglas L. Foshee, the chief executive of El Paso Corp., a natural gas producer and pipeline operator; and Jill M. Considine, a former member of the board of directors of the New York Fed and now chairman of the Butterfield Fulcrum Group in Bermuda, a firm that provides administrative support to hedge funds.