AIG boss, Obama in the firing line as Congress fumes
Posted: 18 March 2009 2110 hrs

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WASHINGTON: AIG boss Edward Liddy on Wednesday battled to placate public fury over big bonuses awarded by the bailed-out insurer, as the politically toxic payouts put President Barack Obama on the defensive.

Liddy, hauled over the coals at a hearing in the House of Representatives, said he had asked employees who got "distasteful" bonuses of more than 100,000 dollars "to return at least half of those payments."

"We've heard the American people loudly and clearly these last few days," he said, while adamant that despite the threat of subpoenas, lurid death threats made it essential to keep the names of the 400-plus bonus recipients private.

"Some have already stepped forward and offered to give up 100 percent of their payment," said the ex-CEO of the Allstate insurance firm, who came out of retirement to take over AIG under a government rescue plan last September.

Pressed on why the 165 million dollars in retention bonuses were necessary in the first place, Liddy stressed that AIG's financial products unit was still sitting on 1.6 trillion dollars in investments that needed expertise to unwind.

"I'm trying desperately to prevent an uncontrolled collapse of that business," he said, warning that the future of the entire American International Group and possibly the global economy was at stake.

Lawmakers vented their fury as Liddy appeared before a packed hearing of the House subcommittee on capital markets, not normally a focus of live TV coverage and round-the-block queues of would-be spectators.

Subcommittee chairman Paul Kanjorski, a Democrat, rose to his feet and brandished his gavel to demand the middle-aged women members of the anti-war group "Code Pink" hand over anti-AIG signs or risk arrest.

Congressman Paul Hodes said AIG now stands for "Arrogance, Incompetence and Greed." His fellow Democrat Gary Ackerman spoke of "a tidal wave of rage" sweeping the recession-hit United States.

Liddy's mea culpa was insufficient for Democrat Elijah Cummings, who told MSNBC that it was time for Obama to decide that "maybe we need to come up with some new leadership here."

But Republicans had a bigger target in their sights as Obama, for a second day, was forced to defend his under-fire Treasury Secretary Timothy Geithner, who is accused of bungling the AIG case and a broader bank rescue plan.

"Nobody's working harder than this guy. He is making all the right moves in terms of playing a bad hand," the president told reporters.

"We are exploring every possible avenue, as is Congress, to see what we can do," Obama said when pressed on the AIG bonuses, which turned 73 employees into millionaires overnight.

Liddy got a measure of sympathy from Republican Spencer Bachus, who noted the new AIG boss was installed by then Treasury secretary Henry Paulson for a token salary of one dollar a year.

But for most Republicans at the hearing, the real target was Geithner and by extension Obama, as they railed against ploughing billions of taxpayer money into a series of bailouts - begun by the last, Republican, administration.

Geithner is "on thin ice," Republican House leader John Boehner told a Nashville-based radio host. He queried "what did the administration know, when did they know it and what did they do about it?"

Kanjorski said Geithner and Federal Reserve chairman Ben Bernanke would appear before the full financial services committee next Tuesday on the mess at AIG, which is now controlled 80 percent by the US taxpayer.

"They have much to explain not only to us, but also to the American people," he said.

Geithner said late Tuesday that he was demanding AIG repay the hefty bonuses it gave out last week, mainly to the very London-based traders who crippled the company and helped trigger the global financial crisis.

Liddy said his managers were working hard to restore AIG to its core insurance business so that it can refund the US taxpayer of more than 170 billion dollars in bailout money.

But to do that properly, he said, the company had to accept "the cold realities of competition" and iron-clad contracts that made the bonuses impossible to evade. - AFP/ir/de