Financial Services AIG Hearing Liveblog, Panel 2 (Liddy)
(Video at right: Brad Sherman (D-CA27) from the morning session of this hearing.)
The witnesses are:
- Mr. Edward M. Liddy, Chairman and Chief Executive Officer, American International Group
Kanjorski: Pink ladies respond properly or please leave the room. Signs DOWN!!!
Kanjorski administers oath.
Kanjorski: We’ve had occasion to visit personally 2-3 months ago and 4-6 weeks ago a telephone conversation that wasn’t as great. Mr. Liddy is not a person that is being paid for the CEO position he occupies at AIG, impressed into federal service and he responded to their call. He is former CEO of one of our largest insurance companies. I wanted to make that clear bc I’m sure that you and your family have had a lot of abuse in the last few days. I think it only fair that we set record straight. When we discovered potential bonus payments, I urged you to suppress payment. My understanding that AIG people and my staff would cooperate and transfer docs to lend assistance. Specifically, we wanted to see whether we could vitiate this contract. As of Saturday last we have received no communication regard papers. Only thing we received was a letter indicating that payment was made.
[Note, this whole exchange suggests–rather implausibly–that Kanjorski knew about the bonuses before Geithner did.]
Kanjorski: Sometimes insurance companies delay payment until they’re sued. This appears to be a rushed payment. One of the last payments would have been a denial of the right to pay on the contract. Not a bad remedy. If you had taken that position, these bonus recipients would have been in the same position as the US, worst that could have happened would have been penalty. I thought you were missing gravity of this situation.
Liddy: Why pay these people at all. Trying desperately to prevent uncontrolled collapse of that business. Only way to avoid systemic shock to the economy that the US government help was meant to prevent. We concluded that the risk to the company and the financial system and the economy was too high and that we would have happen what the involvement in AIG was supposed to prevent. I’ve asked employees of AIGFP to step up and do the right thing, those who received retention in excess of $150,000 to give up half. Some have already given up 100% of those payments. Obviously we are meeting at a high point of public anger. As a businessman I’ve seen the good side of capitalism. I’ve now seen its bad side. Mistakes were made on a scale few could have imagined possible. On behalf of my colleagues I want to thank the Fed and Treasury and taxpayer. Most importantly to protect taxpayers.
[Wait. Mr insurance in the last panel said that insurance assets are untouchable. Were they not kept untouchable???? He needs to be asked whether grandma’s life insurance is still safe, bc we’re getting different messages here.]
Kanjorski: You’ve just annnounced that some employees that received those bonuses. Why couldn’t that have been negotiated for the last two months. Why not make that available to this committee, Fed, Treas?
Liddy: Working on it, made it publicly available in 10Ks and 8Qs. Decision I made as much risk assessment as blindly following legal advice. Still $1.6 trillion in that portfolio. There’s risk that that could blow up. It could cause irreperable damage to what we’ve tried to do here.
Kanjorski: If those assets blow up, total destruction or come back for additional funds.
Liddy: Yes, in cooperation with Fed, we could preserve that unit and continue to wind down. $165 million is a very large number. In context of $1.6 trillion it was a good number.
Kanjorski: Bernanke assented to this?
Liddy: They have the ability to weigh in.
Kanjorski: Why wasn’t this committee made aware? Why did you make the payments on a Saturday night?
Liddy: No intent to deceive. They were due. With the Fed.
Kanjorski: you did not discuss this with your staff.
Liddy: We wanted to do what was right with the contracts. We’ve been talkign with teh Fed literally for 3 months.
Kanjorski: And with the secty Treas?
Liddy: No, Fed decides how much we talk to Treas. We’ve asked if they want a separate communication channel.
Kanjorski: You know TARP is going to run out?
[Can we fire Helicopter Ben here, while we’re firing Geithner?]
Liddy: Another element. If something happens to AIG, and puts at risk all the money that has been put into it. Can we stabilize the AIGFP and run it down.
Kanjorski: Are we to assume you’re going to continue this process of talking only to the Fed and not informing Congress and the American people, we assumed that the Fed was communicating with others.