The head of financially troubled insurance giant American International Group (AIG) on Wednesday called on top-earning employees to voluntarily return at least half of the bonuses.
Some employees have already stepped forward to give money back, said Edward Liddy, chairman and chief executive officer of AIG, while testifying under oath at a congressional hearing.
The bonuses could be defended legally as a legal obligation of the company, Liddy told a House subcommittee.
But he said that given the national uproar, he asked those who got “retention payments” over 100,000 dollars to return at least half of it.
Also on Wednesday, U.S. President Barack Obama said he will ask Congress to pass legislation giving the administration greater regulatory authority over financial institutions like AIG.
He and members of his economic council have started talks with leading lawmakers on such a legislation, said the president at the White House before.
Obama once again assailed AIG’s business practices and the millions of dollars in executive bonuses it paid out even as it was 170 billion dollars in debt to government bailouts.
He said he was not trying to quell public anger over AIG. “I think people have a right to be angry. I’m angry,” he said.
Charles Rangel, chairman of the Ways and Means Committee of the U.S. House of Representatives, said Wednesday that the House plans to take up a bill Thursday that would impose a 90 percent tax on bonuses paid to top-earning employees at AIG and other companies receiving big government bailouts.
Under this bill, tax would hit employees who are making more than 250,000 dollars a year, the head of the tax-writing committee said.
The bill would set a 5-billion-dollar threshold for companies to be covered. It would exclude community banks and other smaller companies that have received bailout money from the government.
The AIG, which is now 80-percent owned by the U.S. government, lost 61.7 billion dollars in the fourth quarter of 2008, marking the largest corporate loss in history.
Having taken over 170 billion dollars in federal bailout money since the financial crisis erupted late last year, the ailing insurer is paying hefty awards to its executives.
It distributed 55 million dollars in December and 165 million dollars had to be paid this month.
Liddy, who took over as AIG chief at the request of the government, acknowledged to the committee Wednesday that “we are meeting today at a high point of public anger.”
While AIG has been the recipient of generous amounts of governmental financial aid, the company’s leaders “have to continue managing our business as a business — taking account of the cold realities of competition for customers, for revenues and for employees,” he said.
“Because of this, and because of certain legal obligations, AIG has recently made a set of compensation payments, some of which I find distasteful,” said Liddy, who is not getting a bonus.
According to news reports, the retention payments were not Liddy’s idea. The deals were cut early 2008, long before Liddy was asked by the administration of President George W. Bush, Obama’s predecessor, to take over AIG.
“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 Obama’s Treasury Secretary Timothy Geithner over the weekend.
Geithner himself is now under intense pressure for having failed to stop the AIG bonus payments.
But Obama defended him on Wednesday, saying “he is making all the right moves in terms of playing a bad hand.”
It was up to the government and Congress to give the secretary the regulatory tools to work through the nation’s current economic crisis and to make sure it is not repeated, the president said.
In a letter to House Speaker Nancy Pelosi on Tuesday, Geithner said AIG will be required to reimburse the government for hefty executive bonuses in order to get additional bailout funds.
“We will impose on AIG a contractual commitment to pay the Treasury from the operations of the company in the amount of the retention awards just paid,” said the secretary.
“In addition, we will deduct from the 30 billion dollars in assistance an amount equal to the amount of those payments,” he said.
Geithner also said that Obama had asked him “to fully review all additional measures at my disposal to recoup these bonuses and to recover funds on behalf of taxpayers.”
Meanwhile, the secretary said he would “work with” Edward Liddy” on measures to wind down the AIG in an orderly way and protect the American taxpayer.”
(Xinhua News Agency Marc h 19, 2009)