AIG CEO asks employees to repay some bonus money

By Emily Kaiser and Corbett B. Daly

WASHINGTON (Reuters) - The head of AIG said on Wednesday he was trying desperately 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. "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.

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 -- including some worth $1 million or more paid out to 73 people.

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 had 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.

"It just got harder by many, many multiples," he said.

Fury over the 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.

Many voters view the financial rescues as free handouts to wealthy executives who made bad decisions, and the big bonuses have fueled that anger.

"It is morally reprehensible and fiscally irresponsible to expect bonus money for bringing a corporate giant to its knees," Democratic Representative Carolyn Maloney said.

Another Democrat, Representative Paul Hodes, quipped that AIG stood for "arrogance, incompetence and greed."

But there was some concern that the firestorm in Washington would turn off the big private investors, such as hedge funds, the government needs to help stabilize the financial system.

LIDDY SAYS EMPLOYEES THREATENED