AIG head to tell Congress that insurer is stabilizing
The insurance giant has reduced but not eliminated the risk that its failure could pose to the global economy despite getting more than $180 billion in federal bailout aid, Edward Liddy is expected to tell Congress today.
The government-installed CEO of American International Group Inc. will tell Congress that the insurance giant has reduced but not eliminated the risk that its failure could pose to the global economy despite getting more than $180 billion in federal bailout aid.
How long it will take AIG to repay the government will hinge on how long the worldwide recession drags on, Edward Liddy asserts in testimony he will deliver Wednesday at a hearing by a House panel that is exploring where taxpayer money is going. He also will tell lawmakers that the hobbled company — which has been selling off many of its foreign assets to repay taxpayers — is stabilizing and doesn’t need more bailout money.
The hearing is scheduled to begin at 10:00 a.m. EDT.
AIG, one of the world’s biggest insurance companies, was nearly destroyed last fall at the height of the financial crisis and became one in a string of corporate calamities and a touchstone for public outrage. The huge volume of credit default swaps — a form of insurance against bond defaults — sold by AIG, coupled with rising levels of defaulted mortgage and other debt, threatened the company’s existence and prompted the government to step in.
Government aid to the company now totals $182.5 billion. The U.S. has taken an 80 percent stake in New York-based AIG.
Liddy, in prepared testimony for the House Oversight and Government Reform Committee, says the company has reduced its exposure to credit default swaps to $1.5 trillion, compared with the original amount of $2.7 trillion.
Liddy outlines a plan that would put AIG’s “troubles behind it, repay the monies that we owe the American taxpayer, and secure an outcome that helps to put the American economy back on track.”
“How long the plan will ultimately take will very much depend on how quickly and how strongly the global economy recovers,” Liddy says in his remarks. “Because we are all committed to ensuring that the mistakes of the past are not repeated, we must take the time and exercise the diligence to do this restructuring properly.”
Also scheduled to testify are three trustees charged with overseeing the government’s holding in AIG. They are seeking new board members for the company.
The $165 million in bonuses AIG paid to employees, including to traders in the financial products unit that brought it to the brink of collapse, fueled public and congressional outrage. The Democratic-led House approved a bill in March that would slap punishing taxes on big bonuses at AIG and other companies bailed out by taxpayers.
While AIG is working to divest assets, Liddy says, it doesn’t intend to sell them at “fire-sale prices.” The company has said it plans to retain its U.S. property-casualty and foreign general insurance businesses, and a stake in its foreign life insurance operations.
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