Congress lashes AIG CEO over bonus debacle

By Drew FitzGerald Boston University Washington News Service, Special to the BDN
Posted March 18, 2009, at 8:43 p.m.

WASHINGTON — Lawmakers expressed surprise and outrage Wednesday as they learned the details of $165 million in bonuses that troubled insurer American International Group paid some of its executives while accepting billions in government bailout money.

Recognizing surging public anger over the retention bonuses AIG paid its top employees — some of whom worked at the same troubled securities trading unit that drove the company to the brink of failure — House and Senate members offered strong rebukes and new legislation to help get back the taxpayer money used to pay the executives.

During his Wednesday testimony before the House Financial Services Committee, Edward Liddy, the CEO of AIG, apologized repeatedly for the payments. He noted that he joined AIG after the company signed off on the bonuses and could not rescind the compensation without breaking legal contracts.

He did, however, surprise committee members by announcing 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.

Lawmakers were in no mood to wait. Liddy was still fielding their questions when House Democratic leaders announced plans for a vote Thursday on legislation to tax away 90 percent of the extra pay for executives at AIG and many other bailed-out firms.

Meanwhile Republicans stressed they had been locked out of discussions earlier this year when Democrats decided to jettison a provision from legislation that could have taxed the payments.

Sen. Olympia Snowe, R-Maine, said she will help resubmit a stronger version of legislation she and Sen. Ron Wyden, D-Ore., sponsored last month to retrieve large bonuses issued by companies receiving government assistance under the Troubled Asset Relief Program. The revived proposal would tax the companies and possi-bly the individuals who refuse to give back the money.

Congressional Democrats in conference committee removed the Snowe-Wyden amendment to the stimulus bill but inserted a watered-down version of bonus pay restrictions originally proposed by Sen. Chris Dodd, D-Conn.

“It’s virtually a toothless provision, and ours was practically ironclad,” Snowe said in a later telephone interview. The negotiations were “all behind closed doors,” she said, “so it was very difficult to ascertain what was happening.”

Sen. Susan Collins, R-Maine, said she voted against authorizing new bailout funds because of the lack of transparency in the first phase of funding.

“I am angry that the Treasury Department failed to exercise its authority to prohibit these bonuses in the first place,” Collins said in a statement. “As a condition of AIG receiving funds, the Treasury Department should have included a contractual requirement prohibiting the company from awarding these outrageous bonuses.”

President Obama sought anew to quell a furor that has bedeviled his administration since word of the bonuses surfaced over the weekend.

Obama, who took office just under two months ago, told reporters 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 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 Tim Geithner, who has been the target of growing Republican criticism.

Obama spoke as congressional Democrats worked on legislation designed to recoup most or all of the $165 million by exposing it to new taxes.

Rep. Charles Rangel, D-N.Y., chairman of the tax-writing House Ways and Means Committee, said the new 90 percent tax would apply to bonus money paid to employees earning more than $250,000 at firms that have received more than $5 billion in federal bailout funds. Mortgage giants Fannie Mae and Freddie Mac are cov-ered under the proposal.

Majority Leader Steny Hoyer, D-Md., said 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 the outcome of the vote would probably be determined by tax-averse Republicans.

Snowe said the government can and should retrieve taxpayer money from the companies, but said the Senate proposal “may be a better way to go about it to address the concerns of constitutionality.”

Snowe nevertheless criticized the heads of corporations such as AIG and Merrill Lynch for their “dismissive” and “arrogant” attitude toward public opinion and Congress. She said to her knowledge the heads of those corporations never notified the Finance Committee they were dispensing bonuses after receiving government bailout funds.

“It’s a mind-set and a culture on Wall Street,” she said. “They don’t understand it’s a new day.”

The Associated Press contributed to this report.

http://bangordailynews.com/2009/03/18/news/congress-lashes-aig-ceo-over-bonus-debacle/ printed on September 17, 2014