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Pressure grows for return of AIG bonuses
Threats of subpoenas and new taxes greet head of company at tense hearing
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Published: March 19, 2009
WASHINGTON
Under pressure from the Obama administration and Congress, the head of bailed-out insurance company AIG said yesterday that some of the company's executives had begun returning all or part of bonuses totaling $165 million.
Edward Liddy offered no details, and legislators were in no mood to wait. He was still answering their questions when House Democratic leaders announced plans for a vote today on legislation to tax away 90 percent of the extra pay for executives at AIG and other bailed-out companies.
Liddy, brought in last year to oversee a company that has received $182 billion in federal bailout money, said he, too, is angry about the bonuses. But 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."
"Eat it now. Take it out of your profits down the road. It's a lot sweeter now than it's going to be later," said Rep. Gary Ackerman, D-N.Y.
Liddy slid into the witness chair at a congressional hearing as President Obama tried again to quell a furor that has bedeviled his administration since word of the bonuses surfaced over the weekend.
Obama told reporters that his administration was not responsible for a lack of federal supervision of AIG that preceded the company's demise, nor for the decision made last year to pay what he called "outrageous bonuses."
Still, he said, "the buck stops with me." He said that "my goal is to make sure that we never put ourselves in this kind of position again," and he disclosed that the administration was consulting with Congress on the possibility of creating a new agency to govern the meltdown of large financial institutions such as AIG.
He also gave a strong vote of confidence to Treasury Secretary Timothy Geithner, who has been the target of growing criticism.
Obama spoke as congressional Democrats worked on legislation intended to recoup most or all of the $165 million through new taxes.
Rep. Charles Rangel, D-N.Y., the chairman of the tax-writing House Ways and Means Committee, said that the new 90 percent tax would apply to bonus money paid to employees earning more than $250,000 at companies that have received more than $5 billion in federal bailout money. Mortgage companies Fannie Mae and Freddie Mac are covered under the proposal.
The House majority leader, Rep. Steny Hoyer, D-Md., said that the bill would be voted on under rules requiring a two-thirds majority for passage. Democrats are in comfortable control of the House but do not control two-thirds of the seats, meaning that the outcome of the vote would probably be determined by tax-averse Republicans.
Liddy's presence in a congressional hearing room was evidence of a bipartisan opposition to the bonuses, although his status as a $1-a-year CEO called out of retirement last year to try and untangle AIG's financial mess made him a less-than-easy target for expressions of outrage.
"No one knows better than I that AIG has been the recipient of generous amounts of government financial aid," he said. "We have been the beneficiary of the American people's forbearance and patience," he added, acknowledging that the patience was wearing thin.
Liddy said that on Tuesday, he had "asked those who have received retention payments in excess of $100,000 or more to return at least half of those payments." Some have "already stepped forward and returned 100 percent," he added.
Asked by Rep. Barney Frank, D-Mass., whether he would turn over the names of individuals who received the money, as well as the amounts, Liddy said he would do so only if assured that the information is not made public.
When Frank said he might pursue a subpoena, Liddy said he was concerned about the safety of the employees and their families, and read aloud from a death threat received by one of them.
Frank said he would be guided in part by security considerations, but Ackerman later noted that Andrew Cuomo, the New York attorney general, was already pursuing the names with a subpoena.
Liddy said he had not yet complied, sidestepped several times when asked whether he would and finally said, "It would be our intent" to do so.
Separately, a New York state judge ordered Bank of America Corp. to disclose information about bonuses given to employees at Merrill Lynch & Co. just before the bank bought the brokerage company."
AIG spokesman Mark Herr said he could not say how many executives had returned the money.
Liddy said that the Federal Reserve knew long in advance of the bonus payments and acquiesced in them, noting that officials from the independent agency attend key company meetings. But he said that the same was not true of Geithner, adding, "We do our work with the Federal Reserve."
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