AIG CEO asks employees to repay some bonus money

By Emily Kaiser and Corbett B. Daly

WASHINGTON (Reuters) - The head of AIG said he was trying to prevent the company from collapsing when he allowed the payment of $165 million in bonuses that have stoked outrage stretching from the White House to Main Street.

Edward Liddy, who took over as chairman and chief executive of American International Group Inc in September when the government stepped in with the first of a series of rescues, said he had asked employees receiving more than $100,000 in bonuses to repay at least half.

"Americans are asking quite simply, Why pay these people anything at all?" Liddy told a House of Representatives subcommittee on Wednesday. "Here's why: I am trying desperately to prevent an uncontrolled collapse of that business."

Liddy said some employees had already given back their entire bonuses. Some had taken payouts and left the company.

One AIG executive who agreed to return his bonus was Douglas Poling, who received the largest payout of more than $6.4 million, according to a report in Thursday's Wall Street Journal, quoting a person familiar with the matter. Poling, 48, is an executive vice president responsible for energy and infrastructure investments, the Journal said. When contacted by the paper, Poling declined comment.

UNDER FIRE FROM PUBLIC, POLITICIANS

AIG has drawn intense fire from the public, politicians and President Barack Obama for accepting up to $180 billion in government aid and then handing out fat bonuses.

Liddy said the payouts were necessary to retain top employees with the specialized knowledge to dispose of $2.7 trillion in complex securities that ended up dragging the insurer to the brink of collapse last year.

He said the company whittled down that amount to $1.6 trillion, and he was worried that employees responsible for winding down the rest would return their bonuses "with their letters of resignation," which would make the task tougher.

But on Thursday, The Washington Post reported that the work of defusing the most dangerous bets placed by AIG was largely concluded before the company gave out bonuses to employees it said it needed to retain to avoid a financial meltdown.

Citing company documents and interviews, the newspaper said the outstanding volume of risky and highly complex derivatives had been reduced to roughly $13 billion from $78 billion by the end of December, the Post said, citing the company's financial filings.

Two executives with AIG's Financial Products unit were cited as saying the hardest work was complete and their focus has shifted to the resolution of a vast but less risky portfolio of bets on more straightforward financial instruments.

'PEOPLE ARE RIGHT TO BE ANGRY' - OBAMA

Fury over the AIG bonuses threatens to undermine Obama's efforts to solve the credit crisis and pull the economy out of a deep recession. He has said he might have to ask Congress for money beyond a $700 billion bailout fund approved in October.

"People are right to be angry. I'm angry," Obama said on Wednesday.