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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 also admitted 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 called 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.President Barack Obama has also reiterated his anger at the bonus payments.
He referred to them as an "inappropriate use of taxpayer money".He referred to them as an "inappropriate use of taxpayer money".
"Excess greed and excess compensation have made us all vulnerable," he added."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.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.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''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 appearing 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 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.
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."
Reports even suggest that AIG is considering selling its New York headquarters and a nearby office block.Reports even suggest that AIG is considering selling its New York headquarters and a nearby office block.
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 lossRecord loss
Earlier this week, Barack Obama expressed anger at the bonuses, calling the payments "an outrage".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."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.