American International Group Inc. CEO Ed Liddy met some harsh criticism at a congressional hearing on Wednesday as lawmakers demanded answers on the taxpayer bailout of the giant insurer.
Rep. Dennis Kucinich wagged his finger at Liddy, who was brought in as chief executive last September to help right the company, and accused AIG of cheating the pension funds of public employees in Kucinich’s home state of Ohio.
“I came to Congress not to represent these people on Wall Street who have been shafting the American people … not going to let you get away with it,” Kucinich told Liddy, who receives an annual salary of $1.
AIG, once the world’s largest insurer, was bailed out last September after large derivatives losses threatened to drive it into bankruptcy.
Liddy told Congress the insurer had a plan in place that should allow it to repay taxpayers. “If the marketplace holds the way it is right now, we think that the American taxpayer will be fully repaid,” he told the hearing, before House of Representatives Committee on Oversight and Government Reform.
“It will take somewhere between three to five years,” he said, adding that if the economy worsens, it could be longer.
The hearing was the second time members of Congress have upbraided Liddy for events at AIG, including retention bonuses earlier this year for executives of a financial products unit responsible for most of the company’s financial bleeding.
Liddy, in a recent interview with Reuters, said he understood the anger but found it hard to stomach personally.
“There is fear about the economy, and people are worried about their jobs and getting their kids through school,” he said.
“It is difficult to be the recipient of that kind of abuse when I am on the side of the taxpayer, brought in to help,” he added.
Trustees of the government’s nearly 80 percent stake in AIG told the hearing they were taking steps to make a “fresh start” at the insurer.
They have named five nominees to the AIG board, to be voted on at the company’s annual meeting, which has been postponed until later next month.
Trustee Douglas Foshee, chief executive of natural gas producer El Paso Corp, said a reshaped board was needed to give AIG “a fresh start — a restart.”
Media reports have named the five as Harvey Golub, a former American Express CEO; Christopher Lynch, a retired KPMG partner; Arthur Martinez, former head of Sears, Roebuck & Co; Robert “Steve” Miller, Delphi Corp.’s executive chairman, and Douglas Steenland, former CEO of Northwest Airlines Corp.
Along with four other directors appointed since AIG’s last annual meeting a year ago, the board is expected to have a total of nine new members.
The new count includes Liddy, who is also chairman.
Foshee, Jill Considine and Chester Feldberg were named trustees to oversee AIG stock issued to a federal trust earlier this year.
The U.S. agreed to extend up to $180 billion in aid to AIG after it was decided that letting the company fail would have been catastrophic for global financial markets.
Liddy was recruited to the CEO’s post within hours of AIG’s Sept. 16 bailout, with a mandate to sell off assets to generate funds to repay taxpayers. He had recently retired as chairman of Allstate, the largest publicly traded U.S. home and auto insurer, but still sat on corporate boards, including at Goldman Sachs.
In his testimony, Liddy said that as a Goldman director, he may have been privy to discussions concerning the precarious financial state of AIG and Lehman Bros., the investment bank that failed around the same time as the AIG bailout.
He told Rep. Marcy Kaptur that he had not personally kept notes of Goldman board meetings. Kaptur asked the chairman of the committee, Rep. Edolphus Towns, to use the panel’s power to subpoena Goldman’s board meeting records.
Liddy stepped down from the Goldman board about a week after he assumed the CEO post at AIG.
So far, AIG has agreed to sell more than a dozen units and properties, generating about $5 billion. Larger sales have foundered amid the credit crisis, leading the company to consider initial public offerings instead.
Foshee, the government trustee, testified that launching IPOs for AIG’s largest insurance divisions would help the company to repay taxpayers and also benefit AIG employees who are presently “under the negative halo of the AIG brand.”
Proceeds from asset sales are to repay AIG debt of $45 billion drawn from a Federal Reserve credit facility and $40 billion received under another federal program.
“We will do everything we can to not require additional federal funding,” Liddy told the committee. “Asset values have to stay strong. There has to be a capital market that allows us to take businesses public.”
(Reporting by Kevin Drawbaugh and Lilli Zuill; Editing by Andrea Ricci, John Wallace and Bernard Orr)
1. Do you think Liddy’s relationship with Goldman matters?
2. How can AIG remove the “negative halo of the AIG brand?”
3. Should AIG be allowed to pay retention bonuses?
Was this article valuable?
Here are more articles you may enjoy.