The head of battered insurance giant AIG was in Washington on Wednesday, appearing before irate Congress members eager to hear why the company paid lavish bonuses to executives while receiving federal bailout money.
"Make no mistake, had I been CEO at the time, I would never have approved the compensation contracts put in place over a year ago," Edward Liddy told the U.S. House financial services subcommittee.
But he nonetheless defended the payments, calling them necessary to fix what's ailing the battered insurance giant.
"Let me tell you why [these bonuses had to be paid]," Liddy said. "I'm trying desperately to prevent an uncontrolled collapse of the business."
"This is the only way to improve AIG's ability to pay taxpayers back quickly and completely," Liddy said.
In response to the outrage, Liddy said on Wednesday morning he asked AIG employees who had received more than $100,000 to return at least 50 per cent of those payouts.
"Many have stepped forward and offered to hand back 100 per cent of their payments," Liddy said.
The AIG head was raked over the coals as Congress members took turns expressing outrage at the company's awarding of more than $165 million US in bonuses to executives, despite receiving billions in federal bailout money.
The subcommittee's chair, Pennsylvania Representative Paul E. Kanjorski, expressed his concern of taxpayer outrage related to the payments.
"I thought you were missing the gravity of the situation," he told Liddy.
CEO works for $1 annual salary
Liddy, a former executive with Allstate and an ex-Goldman Sachs director, is not set to receive any bonus money and will himself be paid a salary of $1 annually for his role as CEO, which he assumed when the insurance giant collapsed in September.
His congressional appearance comes as anger reaches a new high over Wall Street's excesses amid a cratering economy.
Both Congress and the Obama administration are looking for ways to reclaim the bonus money.
Treasury Secretary Timothy Geithner said he's discussing the matter with the Justice Department, while Representative Barney Frank, a Massachusetts Democrat and the chair of the financial services committee, has proposed heavily taxing both companies and individuals for the bonuses.
'Tidal wave of rage'
Calling the reaction to the payments "a tidal wave of rage across America," Congressman Gary Ackerman of New York said taxpayers are demanding accountability over Wall Street's greed.
Several drastic measures were suggested by committee members on Wednesday, including a proposed bill of a 100 per cent tax on bonuses at firms majority-owned by U.S. taxpayers, and even a move to push AIG into outright bankruptcy.
"It is time for us to assert our ownership on the situation," Frank said. "These bonuses are wholly unjustifiable."
But observers say the verbal flogging of the CEO rings somewhat hollow, considering Liddy joined AIG many months after the contracts setting bonuses at AIG's financial products unit were written.
And because the payouts have been on the books for months, the same legislators eager to grill Liddy for the payments were the ones who signed off on the federal stimulus package that allowed AIG to go forward with the bonuses in the first place.
The bonuses range from $1,000 to nearly $6.5 million. Although no specific names of people receiving payments have been released, more than 73 employees received bonuses in excess of $1 million.
The bonuses were so-called "retention" bonuses designed to discourage employees from leaving for other firms, but at least 11 of the employees who received bonuses have already left the firm.