US Lawmakers Question Secrecy, Plans At AIG
May 13 2009 - 11:43AM
Dow Jones News
The U.S. government's rescue of American International Group
Inc. (AIG) and the long-term plans to pay back taxpayer funds
remain shrouded in secrecy, U.S. lawmakers asserted Wednesday,
chiding the firm for not being forthcoming with answers.
"I was surprised and disappointed to see that AIG continues to
argue for secrecy," said Rep. Edolphus Towns, D-N.Y., chairman of
the House Oversight and Government Reform Committee.
"We are not willing to let $180 billion go just on trust," Towns
added.
Lawmakers took aim at both the embattled insurer and the AIG
Trust, the three-member board overseeing the government's 80%
ownership stake in the firm. Key to the question is the role of the
Federal Reserve Bank of New York, which set up the AIG Trust, said
Rep. Darrell Issa, R-Calif., the panel's ranking Republican. He
called the three-member board "an unconstitutional and
unaccountable entity."
"It is inappropriate for shadowy regulators and bureaucrats to
use any legal sleight-of-hand to obscure their influence in running
the U.S. financial sector," Issa said.
The tension was highlighted by an early line of questioning to
AIG Chief Executive Edward Liddy. Lawmakers pressed him for the
details of "Project Destiny," an AIG business plan that the firm
had already provided details of to the Federal Reserve and the
Treasury Department. Liddy balked at the request, saying the plan
contained commercially sensitive information.
That claim did not sit well with Towns and Issa, who noted that
information provided to the Fed and Treasury should not be withheld
from Congress. Liddy relented, but only after consulting with his
attorney and receiving assurances from lawmakers the information
would be protected.
The broad question for lawmakers was whether the company will
ever be able to repay taxpayers for the aid put forth to prop up
the firm. Liddy, when pressed for a guarantee that the government
would not have to give AIG more money and that taxpayers would
receive a 100% return on their investment, said he couldn't do
either.
"The answer is very dependent on what happens to the overall
financial marketplace," Liddy said. While the government aid
received so far should be "sufficient" and the company's stated
goal is to repay the U.S. government, it will depend on asset
values and the health of the overall economy, he said.
"It will take somewhere between three and five years," Liddy
said of repaying the government, assuming the economy does not
deteriorate further.
Liddy also said the firm hopes to make "material progress" on
the immense amount of counterparty contracts it still has
outstanding. He said the counterparty exposure, which at its zenith
reached $2.7 trillion, was at $1.5 trillion at the end of the first
quarter. By the end of the year, that figure should be "materially
smaller."
-By Michael R. Crittenden, Dow Jones Newswires; 202-862-9273;
michael.crittenden@dowjones.com