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The head of battered insurance giant AIG told
Congress on Wednesday that "we've heard the American people loudly
and clearly" in their rage over executive bonuses and appealed to
employees to voluntarily return at least half of the money.


      Testifying under oath at a congressional hearing as intense as
any in recent memory, Edward Liddy said that some workers already
have stepped forward to give money back.


      The company became the target of a political firestorm after the
disclosure over the weekend that it had paid $165 million in
"retention bonuses" to its employees at the same time it was
accepting bailout funds from U.S. taxpayers. 


Some of the payments
were made to the same traders and executives whose risky financial
behavior caused the company's near collapse.


Liddy told a House Financial Services subcommittee that, while
the bonuses were a legal obligation of the company that is now 80
percent owned by the federal government, 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
up and returned" 100 percent.


      Responding to a question, Liddy also said the Federal Reserve
knew in advance of the bonus payments and acquiesced in them.


      Fed Chairman Ben Bernanke has been publicly critical of the
bonuses, as has Obama, Geithner, and congressional leaders from
both parties.


      Despite Liddy's announcement that employees were stepping
forward to return bonus money, he ran into a wall of criticism from
committee members.


      Rep. Barney Frank, D-Mass., chairman of the Financial Services
Committee, demanded that the company submit to Congress a list "of
people who received the bonuses, whether they paid them back or
not." 

If the names were not provided "without restriction,"
Frank warned, he would ask the committee to vote to subpoena them.


      Liddy, while saying "we will obviously comply with the law,"
told Frank he was "concerned about the safety of our people."


      He said he would only give the names of the bonus recipients on
the basis of confidentially. He read aloud threats that AIG
employees had received, including one that suggested that all bonus
recipients should be "executed with piano wire around their
necks."


      Another one read: "If the government can't do this properly, we
the people will take it in our own hands and see that justice is
done. I'm looking for all the CEO's names, kids, where they live,
etc."


      Frank said he would consult with security officials, but that
his request for the names stands.


      For the American public, AIG now stands for "arrogance,
incompetence and greed," said Rep. Paul Hodes, D-N.H.


      Rep. Scott Garrett of New Jersey, the senior Republican on the
subcommittee, complained that the administration still has no exit
strategy for disentangling itself from the insurance giant.


      "Part of me wants to say to some of the loudest critics, 'What
did you expect and why weren't you asking more questions before?' I
would argue that the real outrage now is the $170 billion of
taxpayer money that's been pumped into this company and to what
effect," he said.


      Rep. Gary Ackerman, D-N.Y., cited a "tidal wave of rage"
throughout the country.


      Meanwhile, the agency that oversees AIG said that, while its
criticism of the company's practices had sharpened over the past
five years, it failed to recognize the extent of the risk posed by
the exotic financial instruments the insurance company offered,
many of them tied to a housing market that had long been rising.


      Scott Polakoff, acting director of the Office of Thrift
Supervision, said regulators failed to accurately predict what
would happen to AIG's so-called credit default swaps - a form of
insurance - if housing values collapsed, as they have. 

"There are
a lot of people walking around who failed to understand how bad the
real estate market had gotten," he said.


      AIG is under fire for $220 million in retention bonuses paid to
employees in its troubled financial products division. The most
recent payment of $165 million began to be paid last Friday.


      The retention payments - ranging from $1,000 to nearly $6.5
million - were put together in early 2008, long before
then-Treasury Secretary Henry Paulson asked Liddy to take over the
company. 


Liddy, the retired former chief of Allstate Insurance Co.,
himself is not getting a bonus and is only drawing $1 a year in
salary.


      "No one knows better than I that AIG has been the recipient of
generous amounts of governmental financial aid. We have been the
beneficiary of the American people's forbearance and patience," he
said. 


But he also said that "we have to continue managing our
business as a business - taking account of the cold realities of
competition for customers, for revenues and for employees."


      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 U.S. government bailouts of their own.


      Orice Williams, director of financial markets and community
investment at the Government Accountability Office, the
government's top watchdog agency, told the panel that the
government's intervention helped AIG avoid failure, but that the
company is still struggling to pay back the money.
      


Market and other conditions have prevented the insurer from
making significant asset sales, she testified. She said most
restructuring efforts are still under way.

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The head of financially strapped AIG is
telling Congress he's heard the rage over executive bonuses and has called on employees to voluntarily return at least half of the
money.

AIG chairman says employees returning some bonuses

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