Edward Liddy, chief executive of AIG, on Wednesday tried to soothe anger against the bailed-out insurance group by urging employees to give back the $165m in bonuses that have sparked a political firestorm.
He told legislators he had asked employees of AIG Financial Products – the arm that brought the group to the brink of collapse – to “step up and do the right thing”. The concession came as President Barack Obama defended Timothy Geithner, Treasury secretary, amid criticism of the administration’s handling of the controversy.
Mr Obama said he had “complete confidence” in Mr Geithner as the Treasury chief faced calls to quit from at least two Republican legislators. Republicans want to know why he did not challenge the bonuses before approving $30bn of fresh federal aid to AIG this month. Congressman Connie Mack said Mr Geithner “should either resign or be fired for the good of the country”.
The president praised Mr Geithner for tackling the crisis with “intelligence and diligence”, arguing that he faced the toughest challenge of any Treasury secretary since Alexander Hamilton after the Revolutionary War. “Nobody’s working harder than this guy,” said Mr Obama.
The resignation calls were echoed by protesters at a Congressional hearing into the AIG bail-out, while Republican members pressed Mr Liddy for information about Mr Geithner’s role in waving through the bonuses. The Obama administration has published a timeline of events that shows Mr Geithner learning of the pay-outs on March 10, phoning Mr Liddy on March 11 and informing the White House on March 12. It stressed that Mr Geithner had no part in drafting the bonus deal.
The controversy took a new turn on Wednesday when it emerged that Fannie Mae, the US mortgage financier taken over by the government in September, was planning to pay executive retention bonuses of as much as $611,000 for 2009. Fannie issued a vigorous defence of the bonuses, arguing the scheme was specifically designed to sustain mortgage agencies’ ability to function.