In a congressional hearing on Wednesday, the CEO of American International Group, the troubled insurance company, will face tough questions from angry members of Congress. The appearance by AIG Chief Executive Edward Liddy comes amid continuing outrage about $165 million in bonuses paid out by the company which received $170 billion in help from the U.S. government:
On the eve of the hearing in the House of Representatives Financial Services Committee, condemnations of AIG and the bonuses were coming fast and furious, with the matter for the most part dominating news in Washington.
AIG chief Liddy has asserted that bonuses the company paid were necessary to retain the best and brightest talent, an assertion he expressed directly to U.S. Treasury Secretary Timothy Geithner in a letter, adding that bonus contracts with employees were finalized well before Congress approved financial bail out funds in late 2008.
While President Obama has said the government should use every legal method to block the bonuses, and House and Senate lawmakers prepared legislation aimed at recovering funds, the administration and Congress also face legal complications in doing so.
On Tuesday, in a noisy lobby of a congressional office building, reporters bombarded financial services chairman Barney Frank, a Massachutsetts Democrat, with questions about the AIG bonuses.
While Congress and the administration consider what can be done retroactively to recover funds, Franks says the government should use leverage it now has as 80 percent shareholder in AIG.
"You begin by asserting our rights of ownership," said Barney Frank. "And I do think asserting our rights of ownership strengthens the legal case. I think we should be suing to get those bonuses back not as the government that gave money to this private entity, but as the owner, saying you know what, you got bonuses that you didn't deserve and we want them back, on the merits."
Majority Democrats in the House and Senate crafted various legislative proposals that would try to recover funds by imposing sharp taxes on bonuses paid by companies that were rescued by government bail out money.
Carolyn McCarthy was among Democrats who appeared at a news conference:
"How many times have members [of Congress] said to all these CEO's that have come in front of us: enough, do you get it? Stop it! And what do they do? They keep on going," said Carolyn McCarthy.
New Jersey Republican Leonard Lance joined a group of newly-elected House Republicans supporting a proposal to require the government to recover bonuses.
"Eighty percent of AIG is now owned by the American taxpayers," said Leonard Lance. "The American taxpayers demand that this money be paid back. That is the important of this legislation and moving forward we have to work in a bipartisan way to make sure that this does not happen again."
While joining the expressions of outrage, Republicans also took the opportunity to suggest that the Obama administration has failed to adequately monitor how government financial rescue funds, approved under former President George Bush, were being used.
Senate Minority Leader Mitch McConnell questioned the U.S. Treasury Department's latest aid to AIG, $30 billion delivered just two weeks ago.
"Wouldn't the treasury, and the taxpayer, have had more leverage over AIG's executive contracts before providing another $30 billion in tax money for them," asked Mitch McConnell. "Once that money was handed over to AIG, the leverage was lost."
AIG CEO Liddy's testimony Wednesday to the House committee comes as lawmakers absorb details of the company pay outs, including a report from New York Attorney General Andrew Cuomo that 73 AIG employees received bonus checks of $1 million or more.