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AIG boss acknowledges 'mistakes' | AIG boss acknowledges 'mistakes' |
(30 minutes 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. |
President Barack Obama has also reiterated his anger at the bonus payments. | |
He referred to them as an "inappropriate use of taxpayer money". | |
"Excess greed and excess compensation have made us all vulnerable," he added. | |
The president called for a new model for economic growth that does not rely on the financial sector. | |
He also said that he and members of his economic council have begun discussions with lawmakers on legislation to create a new regulatory body to give the government more authority over financial institutions like AIG. | |
'Wave of rage' | |
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. |
AIG has recently made a set of compensation payments, some of which I find distasteful Edward Liddy, AIG chief executive AIG: Company profile | AIG 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. |
Drastic action is now needed to claw back the massive losses that resulted from from these risks, AIG says. | 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." | 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. | 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. |
Record loss | |
Earlier this week, Barack Obama 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. | |
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. |