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AIG CEO: Bonuses 'Distasteful,' Necessary

Liddy says paying employees will help taxpayer in long run

By Jason Farago, Newser Staff

Posted Mar 18, 2009 6:23 AM CDT

(Newser) – AIG's $165 million bonus payout has produced "a palpable wave of anger," admits Edward Liddy, the insurance giant's government-appointed CEO. But in an op-ed for the Washington Post, Liddy says that paying employees now will prevent "undue risk" and help AIG wind down the most dangerous positions on its book. He adds that "had I been chief executive at the time, I would never have approved the retention contracts."

AIG became so hazardous to the global economy by expanding its business to include a credit-default swaps portfolio, which Liddy calls "the root of the company's troubles." It's already wound down $1 trillion but needs to keep on its current employees to shut down the rest. In the long run, Liddy promises, compensating AIG's employees will enable the company to pay back its debts: "In America, when you owe people money, you pay them."

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The revelation that millions of taxpayer dollars to keep AIG afloat are being paid out as bonuses has hit a mammoth nerve. (AP Photo/Mark Lennihan)

House Financial Services Committee Chairman Rep. Barney Frank, D-Mass. meets reporters on Capitol Hill, March 17, 2009, where he joined the torrent of criticism aimed at American International Group. (AP Photo/J. Scott Applewhite)

Edward Liddy, chairman and chief executive officer of American International Group Inc., attends a luncheon speech in Hong Kong Thursday, Dec. 11, 2008. (AP Photo/Kin Cheung)

Edward Liddy, chairman and chief executive officer of American International Group Inc., speaks after a luncheon speech in Hong Kong Thursday, Dec. 11, 2008. (AP Photo/Kin Cheung)

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It was distasteful to have to make these payments. But we concluded that the risks to the company, and therefore the financial system
and the economy, were unacceptably high. - Edward M. Liddy, CEO and chairman, AIG

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AIG CEO: Bonuses 'Distasteful,' Necessary