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Edward Liddy, CEO of American Insurance Group, warned a congressional panel Wednesday of ‘dire consequences’ if the bailed-out insurer is allowed to fail. Liddy’s warning came in response to questioning by Rep. Paul Kanjorski (D-Penn.), chairman of the Financial Services subcommittee, who asked Liddy if he fully understood the consequences of the decision to pay $165 million in bonuses to AIG executives.
Story Transcript
House Financial Services Subcommittee
March 18, 2009
OFF CAMERA: Do you solemnly swear or affirm that the testimony you will give before this subcommittee in the matters now under consideration will be the truth, the whole truth, and nothing but the truth, so help you God?
EDWARD LIDDY, CEO, AIG: I do.
REP. PAUL KANJORSKI (D-PA): Are you aware of the fact that probably the funds available, the TARP funds, were run out shortly in the likelihood that additional funds will have to be secured by action and authority of Congress?
LIDDY: I am.
KANJORSKI: And do you realize that the actions that you take at AIG and took in this precise case not only impacts AIG and the potentials of that reality occurring that you described, but it may have jeopardized our ability to get a majority in this Congress to support further largesse, to provide funds to prevent a recession, depression, or meltdown? Are you aware that that’s the process of your decision now and how important it was?
LIDDY: I am, sir, although I think there’s also a question of another element, and that is: if something happens to AIG, and AIG goes bankrupt or goes belly up and puts that risk, all the money that has already been put into it, that also can have dire consequences. I know $165 million is a very large number. It’s a very large number. In the context of $1.6 trillion and the money that’s already been invested in us, we thought that was a good trade.
KANJORSKI: Am I to understand you’re saying that Chairman Bernanke or his designated person at the Federal Reserve was informed that you were going to make these payments and acquiesced in that decision?
LIDDY: Yes. Everything we do we do in partnership with the Federal Reserve. The Federal Reserve is at our board meetings, at our compensation committee meetings, at our various meetings on strategy, and they have the ability to weigh in either yay or nay on anything that we decide. And we’ve done that. We’ve been talking about this within the board and with our representatives at the Federal Reserve literally for three months.
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