The head of insurance giant American International Group Inc (AIG) told furious members of Congress that some of the firm’s executives have begun returning all or part of bonuses totaling US$165 million paid out while the company was in hock to US taxpayers for billions.
Edward Liddy said on Wednesday he had asked recipients of more than US$100,000 to return at least half, but offered no details.
He was still fielding their questions when Democratic leaders of House of Representatives announced plans for a vote yesterday on legislation to tax 90 percent of the extra pay for AIG executives and many other companies that have received large bailout packages from the government.
PHOTO: AFP
The bill would levy a 90 percent tax on bonuses paid to employees with family incomes above US$250,000 at companies that have received at least US$5 billion in government bailout money.
Representative Charles Rangel, chairman of the tax-writing House Ways and Means Committee, said the bill also would apply to mortgage giants Fannie Mae and Freddie Mac, among others, while excluding community banks and other smaller companies that have received less bailout money.
Liddy, who took over as CEO and chairman of the company at the government’s request when AIG appeared ready to collapse, said he, too, was angry about the bonuses. He said he asked recipients of more than US$100,000 to return at least half, and added that some have “already stepped forward and returned 100 percent.”
He did not respond directly when advised in pungent terms to pay to the Treasury all the money handed out last weekend in “retention payments.”
AIG has taken US$170 billion in federal bailout money.
Overall, AIG has paid US$220 million in retention awards to its financial products employees — US$55 million in December and US$165 million had to be paid this month.
US President Barack Obama, in remarks at a town-hall meeting in California, said: “I know Washington’s all in a tizzy, and everybody’s pointing fingers at each other and saying, ‘It’s their fault, the Democrats’ fault, the Republicans’ fault.’ Listen, I’ll take responsibility. I’m the president.”
In the same breath, he said, “We didn’t draft these contracts.”
But he added, “It is appropriate when you’re in charge to make sure that stuff doesn’t happen like this.”
Obama tried to head off questions about AIG by saying he understood taxpayers’ anger. And he tried to broaden the issue, which has vexed his young administration.
“These bonuses, outrageous as they are, are a symptom of a much larger problem,” he said. “It’s “a culture where people made enormous sums of money taking irresponsible risks that have now put the entire economy at risk.”
The bailout program remains politically unpopular and has weighed down on Obama’s new presidency, even though the plan began under former president George W. Bush. It also could hamper any attempts Obama may make to wrest still more financial bailout money from Congress. He has said such money likely would be needed.
Obama said, meanwhile, that he and members of his economic council have started talks with leading lawmakers on legislation that would create a new regulatory entity — like the Federal Deposit Insurance Corp — to give the government more authority over such financial institutions as AIG.
Obama said he was not trying to quell anger.
“I think people have a right to be angry. I’m angry,” he said.
Liddy said there “was great angst over the payment of these bonuses, believe me, on — on all of our parts, including the Federal Reserve.”
Nevertheless, he continued, “the judgment we made was the risk was too great that we would lose all the progress we made if we didn’t pay these bonuses.”
Liddy said the bonus recipients had been responsible for cutting about US$1 trillion out of AIG — and, therefore, taxpayer — exposure to losses.
Asked by Democratic Representative Barney Frank whether he would turn over the names of those receiving the bonuses, as well as the amounts, Liddy said he would do so only if assured the information not be made public, because there had been death threats against employees and their families.
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