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AIG boss acknowledges 'mistakes' AIG boss acknowledges 'mistakes'
(about 1 hour later)
The chief executive of AIG has admitted that fundamental mistakes were made at the US insurance giant.The chief executive of AIG has admitted that fundamental mistakes were made at the US insurance giant.
"Mistakes were made at AIG on a scale that few could have imagined possible," Edward Liddy will tell a Congressional hearing later on Wednesday."Mistakes were made at AIG on a scale that few could have imagined possible," Edward Liddy will tell a Congressional hearing later on Wednesday.
He will also admit that AIG is "too complex, too unwieldy and too opaque".He will also admit that AIG is "too complex, too unwieldy and too opaque".
Mr Liddy also calls the $165m (£119m) bonuses paid by AIG "distasteful" after the insurer took about $170bn of aid from the US government.Mr Liddy also calls the $165m (£119m) bonuses paid by AIG "distasteful" after the insurer took about $170bn of aid from the US government.
Mr Liddy is to appear in front of the Congressional committee to answer questions about the bonuses and the plight of AIG.Mr Liddy is to appear in front of the Congressional committee to answer questions about the bonuses and the plight of AIG.
Before Mr Liddy appeared before the committee, members of the committee expressed their anger, not just at the bonuses paid to AIG executives, but also at the $170bn bail-out by the US government.Before Mr Liddy appeared before the committee, members of the committee expressed their anger, not just at the bonuses paid to AIG executives, but also at the $170bn bail-out by the US government.
One referred to a "tidal wave of rage" throughout the US, while another called the US taxpayer "the ultimate sucker" in the whole AIG saga.One referred to a "tidal wave of rage" throughout the US, while another called the US taxpayer "the ultimate sucker" in the whole AIG saga.
'Outrage''Outrage'
AIG has recently made a set of compensation payments, some of which I find distasteful Edward Liddy, AIG chief executive AIG: Company profileAIG has recently made a set of compensation payments, some of which I find distasteful Edward Liddy, AIG chief executive AIG: Company profile
In a prepared testimony, Mr Liddy says the company "strayed from its core competencies in the insurance business".In a prepared testimony, Mr Liddy says the company "strayed from its core competencies in the insurance business".
Nowhere was this more evident than in "the creation of what grew to become an internal hedge fund, which then became substantially overexposed to market risk," he adds.Nowhere was this more evident than in "the creation of what grew to become an internal hedge fund, which then became substantially overexposed to market risk," he adds.
He also addresses the contentious issue of excessive bonuses. Drastic action is now needed to claw back the massive losses that resulted from from these risks, AIG says.
Notes accompanying the written testimony say that the insurer will undertake a "massive restructuring that will effectively break up the company and unlock value to repay taxpayers."
Mr Liddy also addresses the contentious issue of excessive bonuses.
"I am mindful of both of the environment in which we are operating and of the president's call for a more restrained compensation system," he says."I am mindful of both of the environment in which we are operating and of the president's call for a more restrained compensation system," he says.
Mr Liddy has said that he would not have approved the $165m bonuses if he had been chief executive at the time the contracts were signed.Mr Liddy has said that he would not have approved the $165m bonuses if he had been chief executive at the time the contracts were signed.
"AIG has recently made a set of compensation payments, some of which I find distasteful," he says."AIG has recently made a set of compensation payments, some of which I find distasteful," he says.
US President Barack Obama has expressed anger at the bonuses, calling the payments "an outrage".US President Barack Obama has expressed anger at the bonuses, calling the payments "an outrage".
"It's hard to understand how derivative traders at AIG warranted any bonuses, much less $165m in extra pay," he said earlier this week."It's hard to understand how derivative traders at AIG warranted any bonuses, much less $165m in extra pay," he said earlier this week.
US Treasury Secretary Tim Geithner has since said that the government will deduct the bonuses from government funds due to be paid to the insurer.US Treasury Secretary Tim Geithner has since said that the government will deduct the bonuses from government funds due to be paid to the insurer.
Mr Liddy, former chief executive of the Allstate insurance firm, took over at AIG in September, just days days after it was saved from bankruptcy with an $85bn lifeline from the government.Mr Liddy, former chief executive of the Allstate insurance firm, took over at AIG in September, just days days after it was saved from bankruptcy with an $85bn lifeline from the government.
The government has since pumped billions more into the troubled insurer, which reported a loss of $61.7bn for the last three months of 2008 - the biggest quarterly loss in corporate history.The government has since pumped billions more into the troubled insurer, which reported a loss of $61.7bn for the last three months of 2008 - the biggest quarterly loss in corporate history.