WORLD> America
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AIG chairman inherits retention bonus mess
(Agencies)
Updated: 2009-03-18 21:18 WASHINGTON – Edward M. Liddy, chairman and CEO of American International Group Inc. since last fall, has become the reluctant defender of princely employee bonuses that members of Congress - and much of the American public - find indefensible.
AIG, the giant insurance company that has received $170 billion in government assistance, is paying more than $200 million in bonuses to keep employees from fleeing its troubled financial products division. On Wednesday, Liddy was to pull up a chair at a congressional witness table and take the heat. The retention payments - ranging from $1,000 to nearly $6.5 million - were not his idea. Liddy himself is not getting a bonus. The deals were cut early last year, long before then-Treasury Secretary Henry Paulson asked Liddy to take over the company. "I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them," Liddy wrote to the current treasury secretary, Timothy Geithner, over the weekend. But the payments went out. Congress is in a lather and wants the money back. And Liddy, who had been scheduled to testify about AIG before the bonus story took root, is a timely target. The clamor over compensation overshadowed AIG's weekend disclosure that it used more than $90 billion in federal aid to pay out to foreign and domestic banks, including some that had multibillion-dollar US government bailouts of their own. AIG is the single largest recipient of government assistance - a company whose financial transactions were so intricate and intertwined that it was considered simply too big to fail.
Lawmakers already were troubled by the idea of an institution that could single-handedly topple the financial system. Now, Liddy will appear before a House Financial Services subcommittee just as lawmakers from both parties are casting his company as the symbol of excess and abuse of taxpayer dollars. Meanwhile, Rep. Barney Frank, chairman of the Financial Services panel, said he hopes Congress can rewrite a Depression-era law the Federal Reserve used to plow $85 billion into AIG, without conditions and without the need for congressional approval. "The federal government is a major owner of this company. We're the owners, not just the regulators, Barney, D-Mass., said Wednesday on CBS's "The Early Show." "It is my hope that before much further, we will amend that statute," he said. Frank said the mere existence of the 1932 statute enabling the Fed to make the direct payment rendered a no-strings bailout as "a fait accompli." Rep. Carolyn Maloney, a New York Democrat who is on Frank's committee, said that "Congress is going to recoup this money." Maloney said this will happen one way or another, "whether it's through taxes, through a contract change. They say you can't change a contract. We change contracts all the time." Maloney said on NBC's "Today" show that "we're looking at a number of proposals." Congress and the Obama administration on Tuesday appeared to race each other to find ways to strip bonus recipients of their money. The Democratic chairman of the Senate Finance Committee, Max Baucus of Montana, and the panel's top Republican, Charles Grassley of Iowa, immediately proposed legislation that would require companies and individuals to pay a 35 percent tax on all retention awards and on all other bonuses over $50,000. Others suggested even higher tax rates. "If you don't return it on your own, we will do it for you," said Sen. Charles Schumer, D-N.Y. |