Updated from 11:35 a.m. EDTAIG ( AIG) CEO Edward Liddy on Wednesday told lawmakers the company was working to secure the return of at least half of the controversial retention bonuses awarded to top executives. Liddy, addressing a hearing of the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, said the embattled insurer has asked executives in its Financial Services unit who had received bonuses of more than $100,000 to return at least half the amount. AIG, which has received $170 billion in federal bailout money, more than any other private company during the current economic crisis, has come under fire for handing out $165 million in bonuses. Some of the executives have already agreed to give back 100% of the bonuses, Liddy said. The company would work to ensure the maximum participation possible, he said. Liddy, who took the reins of the giant insurer in the fall after the bonuses had already been pledged to the executives, called the payments distasteful, but said the company was obligated legally to pay them. Liddy has not received a bonus. "We are meeting today at a high point of public anger," Liddy said. "I share that anger," he said. AIG has come under fire from lawmakers on both sides of the aisle, regulators and the public since the existence of $220 million in bonuses were widely reported over the weekend. The most recent retention payments -- ranging from $1,000 to nearly $6.5 million -- of $165 million began to be paid last Friday.
Standing on the White House lawn as he prepared to embark on a trip to California, President Barack Obama called AIG's executive bonuses "outrageous," but said the problem goes deeper than that. "Just as outrageous is the culture that these bonuses are a symptom of, that has existed for far too long: excess greed, excess compensation, excess risk-taking," Obama said. "As we work toward getting ourselves out of the recession, I hope that Wall Street and the marketplace doesn't think that we can return to business as usual," he said. "The buck stops with me," Obama told reporters. In opening statements Wednesday at the hearing, Chairman Paul Kanjorski (D., Pa.), criticized the bonus payments. "Something is seriously out of whack and AIG needs to be fixed now," Kanjorski said. Rep. Scott Garrett (R., N.J.) said federal officials and members of Congress should have been more on top of the situation before authorizing the bailout. "The real outrage is the $170 billion pumped into this company and to what effect?" he said. Liddy told lawmakers that the company grew into an internal hedge fund that became overexposed to market risks. AIG is the largest recipient of federal government emergency assistance. The government holds a nearly 80% stake in the company. The Obama administration has said it plans to try to claw back some of those payments, as Treasury Secretary Tim Geithner is scrambling to avoid taking the blame for not stopping them earlier.
Geithner, in a letter sent to Republican and Democratic leaders of the House and Senate, said he did not know about the bonuses until last week. While Geithner said he registered strong objections to Liddy, ultimately Treasury lawyers agreed it would be "legally difficult" to stop the payments. Treasury, however, is working with the Justice Department to explore avenues to recoup the payments and refund U.S. taxpayers, Geithner said in the letter. Liddy, who has led AIG since last fall, has become the reluctant defender of princely employee bonuses that members of Congress -- and much of the American public -- find indefensible. In his prepared remarks, Liddy said, "No one knows better than I that AIG has been the recipient of generous amounts of governmental financial aid. We have been the beneficiary of the American people's forbearance and patience." But he also said that "we have to continue managing our business as a business -- taking account of the cold realities of competition for customers, for revenues and for employees." "Because of this, and because of certain legal obligations, AIG has recently made a set of compensation payments, some of which I find distasteful," Liddy said. He told lawmakers, "I want to assure you that the people at AIG today are working as hard as we can to execute the restructuring plan that, we believe, offers America's taxpayers the best possible income."