Liveblog: AIG - Where is the taxpayer's money going?

By Kayleigh Harvey - Talk Radio News Service


Talk Radio News Service will be liveblogging the House Oversight and Government Reform Committee hearing with AIG CEO Edward Liddy today at 10:00. Refresh this page for updates.

AIG Chairman and CEO, Edward Liddy, will come before Congress today for the second time since it was revealed, in March, that AIG paid out $120 million in bonuses after receiving a $85 billion from the government bailout package.

Chairman of the Committee Edolphus Towns (D-N.Y.) said, "Eight months ago, the American taxpayer came to the rescue of AIG with an $85 billion bailout. That was followed by more money in November, more again in December and more money still in March. The taxpayers have now provided more than $180 billion in financial assistance to AIG.

"A few days ago, we learned that the aIG has put together a plan called Project Destiny. Project Destiny is described as "a multi-year roadmap for the restructuring of AIG. I requested a copy of this plan, but AIG says that disclosing the plan "would undermine its efforts to achieve its goals for the benefit of American taxpayers." AIG says it is consulting on the issue with the New York Fed. In other words, "trust us." Everything will be alright."

Adding, "I was surprised and disappointed to see that AIG continues to argue for secrecy. In his testimony, Mr. Liddy seems to argue that criticism of AIG will somehow hurt the company. Again we are hearing, "Trust us." But we are not willing to let $180 billion go just on trust. We will questions, we will inquire, we will verify, and we will not hesitate to probe every aspect of AIG management and operations to protect the taxpayer's investment."

Ranking Member, Darrell Issa (R-Calif.) said, "I want to acknowledge that none of this is the trustees' fault, they are simply operating within the organization that was created by others, and no doubt do so out of patriotic spirit of public service."

Adding, "The American people have a right to know what is being done with their money."

In his opening testimony Edward Liddy said, "We are working hard to determine the destiny of the component parts of AIG."

Adding, "We intend for taxpayers to realize the fullest possible value from every asset disposition, and we intend that every company that emerges at the end of restructuring will be strong, transparent, and a credit to all its owners.

In particular, we are transferring two major foreign life insurance companies - ALICO and AIA - into special purpose vehicles in exchange for a substantial reduction in AIG's debt to the Federal Reserve Bank of New York. We expect to complete the contractual arrangements for these in the near future."

Liddy added, "We recognize our responsibility to work hand in hand with the government to preserve that value, and I assure you that is our goal. We continue to welcome a frank and open dialogue with Congress on our progress in restructuring, so that you can be in a position to support our efforts. That is essential and I will help us to preserve the value of AIG franchise for the benefit of AIG's stakeholders, the American taxpayer most of all."

Asked by Towns, "Can you confirm that AIG will not require any other additional government money?"

Liddy, "What I can say is we will do our best not to require any additional funding...that answer is very dependent on what happens around the financial globe...I can't give you a guarantee on that. I can't control what happens in the global market."

Towns asked Liddy to provide a copy of 'Project Destiny' by the end of the day.

Liddy responded by saying, "I will do my best."

Liddy will consult with AIG lawyers on this issue as he fears that releasing details of 'Project Destiny' could provide access to marketing information to their competitors and then impact AIG's ability to pay back taxpayers money."

Towns closed by saying, "Do you honestly believe you have a right to prevent Congress from reviewing how the taxpayers money is being spent?"

Frustrated at Liddy's response that he would need to talk to his counsel before providing Congress with details on 'Project Destiny,' Issa gave Mr. Liddy a chance to talk to his attorney sitting behind him.

After conversing for less than two minutes, Mr. Liddy concluded that it there would be limitations to what can be provided as there is "commercially sensitive" information in the plans that AIG would not want competitors to see.

Congressman Paul Kanjorski (D-Penn.) said, "Do you have any opinion whether it would be helpful...if in someway we developed a Federal Insurance charter?"

Liddy replied, "There needs to be someone that looks at systemic risks."

Congressman Brian Bilbray (R-Calif.), "Are you hoping to be able to pay back the taxpayer before the ceiling falls in....How long will it take to pay the taxpayers back?"

Liddy replied, "Somewhere between three and five years. What makes the answer so difficult is how strong will the economy be worldwide and how strong will the financial markets be worldwide."

Bilbray added, "When will you start repaying debt?"

Liddy replied, "As soon as possible....hopefully in a matter of months assuming we get all the Federal approval. "

Congressman Elijah Cummings (D-Md.) asked, "What can you tell them [people who have lost jobs and homes] about what they can expect to see as they see foreclosures signs in front of their houses and businesses?

AIG is looking at its contracts to ensure bonuses are paid on performance basis. Liddy said, "If there are bonuses you earn them."

Congressman Jeff Fortenberry (R-Neb.) asked Liddy to explain to the public what exactly AIG is.

Listing several branches, Liddy said, "It's an insurance company with a few exceptions."

Liddy told the committee, "My time today is focused on today and tomorrow and less on yesterday."

Fortenberry asked Liddy about new figures on AIG bonuses differing from those provided to Congress in March.

It has now been revealed that AIG paid $454 million to bonuses in to its employees in 2008, compared to the $120 million figure released in March.

Apologizing for any confusion on how much was paid exactly for bonuses. Liddy said, the discrepancy on the amount occurred when they were asked by Congress about different type of bonuses, specifically cooperate bonuses.

Appearing frustrated and angry at Liddy's responses throughout the hearing, Congressman Dennis Kucinich (D-Ohio), told Liddy that AIG's behavior was "unacceptable." Adding, "You cheated people who saved lives, who save our children, what are you going to do about this?"

Liddy said he would work with Congress and offered to meet with Kucinich after the hearing.

Kucinich told Liddy that until this matter is resolved "Congress is not going to let you go," shouting that this was "unacceptable" behavior. He told Liddy that Congress "will keep calling you back here," until this issue was concluded.

Kucinich agreed to meet with Liddy following the hearing.

Congressman Jeff Flake (R-Ariz.) asked Liddy, "Can you tell us what the administration's plans are with moving forward with AIG?"

Liddy said, "I cannot."

Congressman William Clay (D-Mo.) asked, "Is AIG really too bog to fail and has it already failed?"

Liddy said, "I would point out to you that this quarter's figures showed that losses for this quarter were not 62 billion...it was 4.3 billion, substantially less than it was in the first quarter of 2008. It's a very complicated institution. It's a very complicated operation."

Hearing was suspended until 12.15pm as Congress was called to vote.

Congressman Stephen Lynch (D-Mass.) said he was “disappointed” with Mr. Liddy as he failed to address the question both in this written and oral testimony, relating to where the taxpayer’s money is going. Lynch said, “It’s a new ball game. One of transparency and accountability.”

Liddy replied, "The last time I was here we provided a very exhaustive document that explained where all the taxpayers money has gone...it was a very exhaustive analysis that explains that in some detail. I thought we had already answered that."

Lynch said, "We are going to have to have you back up this. I am with Kucinich on this. We will not be rolled on this. When we call you up here and ask you a question, we want you to answer the question. "

Congressman Gerry Connolly (D-Va.) asked, “With respects to the bonuses, how many people left the company?

Liddy said, “On the FP sector we had about maybe 10 to 12 to maybe 15 resignations...don’t know if the resignations are over yet.”

Congressman Lynn Westmoreland (R-Ga.) asked Mr. Liddy to get and provide Congress with the number of lawsuits AIG are facing and to find out whether news reports on binding arbitration are true.

Congresswoman Marcy Kaptur (D-Ohio) asked, “Have you paid the taxpayers back any of the money they have lent you to date?”

Liddy responded, “Yes.”

Kaptur: “How much?”

Liddy: “Several billion dollars”

Kaptur: “Several Billion?”

Liddy: “Yes”

Kaptur asked for a list of dates, sums to be submitted for the record. Liddy agreed.

Kaptur then questioned Liddy about his connections with Goldman Sachs which revealed that Mr. Liddy has shares to the market value of $3 million from Golden Sachs.

Congressman Michael Turner (R-Ohio) wants to work with AIG and Mr. Liddy to look at how to improve mortgage back loan to value ratios. Turner fears that if this is not addressed then, "I believe that what we are going the see is the largest theft or fraud in history."

Congresswoman Jackie Speier (D-Calif.) told Liddy, “We are all scratching our heads how can you possibly pay back the taxpayers?”

Liddy said, “It is possible...as I said you before it depends on market circumstances.”

Kucinich said, "Is it true that even if the United States took over AIG 100 per cent these bonuses would still be awarded?"

“No. We have been looking at how we keep people spirited but how we keep in line with Federal regulations.”

Kucinich read a letter sent to employees which asked them to keep bonuses confidential. Kucinich asked Liddy, to inform Congress about any future bonuses.

Towns asked Mr. Liddy to remember that the American public wants to know why a company that contributed to our current economic crisis paid out bonuses that rewarded failure.

Kaptur asked anyone in the committee room currently under contract with AIG to stand - 6 people stood. Kaptur has asked for the details of their contracts.

Kaptur continues to probe into Liddy's connections with Goldman Sachs. Asking the committee to obtain minutes from meetings Liddy attended.

Issa told Liddy, "Please do not think you will not be back before us if you cannot answer...what have the American taxpayers bought for $190 billion dollars?"

Adding, "Provide us with some understanding on how you will pay us back."

Liddy said, "Assets values should be sufficient to satisfy all of what the company owes."

Congresswoman Carolyn Maloney (D-N.Y.) asked, "Whether the life insurance sector of AIG needed a bailout?"

Liddy said, "The life insurance sector was solvent."

Maloney asked, "Do you foresee that in the future that youl will not need any additional public money?

Liddy sighed saying, "Again, I would say that I certainly hope so."

Towns in closing told Liddy that he needed to understand that the "American taxpayer is frustrated."

Edward Liddy was able to leave the hearing at 1.36pm.

“The Most Dangerous Credit Card in the History of the World”

By Michael Ruhl, University of New Mexico – Talk Radio News Service

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House Minority Leader John Boehner (R-Ohio)
Photo by Michael Ruhl

House Minority Leader John Boehner (R-Ohio) called congressional voting cards “the most dangerous credit card in the history of the world”, because then enable Congress and the president to engage in reckless spending. This was not Boehner's first criticism of Obama, but his statement came on the 101st day of the Obama Administration, a time which Boehner has criticized as being pock marked with excessive borrowing, reckless spending and a massive growth in government.

Boehner said that Democrat’s “record on spending and debt is staggering, but our economy is growing weaker, and it’s not going to get any better by growing the size of the government here in Washington.”

Boehner believes that the Democratically controlled Congress has enabled and contributed to the recklessness, and thinks it is up to the Republicans to put a stop to it. Republicans must be “the party of better solutions” if they are going to stand up to the Democrats in Congress, Boehner said, adding that he hopes Democrats will be committed to a bipartisan policy approach..

Citing the elections of 2008, Boehner said “out brand has been tarnished”, but to help the party serve the American people, Republicans must stand up to the Obama Administration when disagreements arise, and to offer alternative solutions.

Leader Boehner applauded President Obama on his strategy towards Afghanistan and Iraq, but showed concern at Obama’s greater national security policy.

“The big question continues to be: what is the Administration’s overarching plan to fight terrorism? Judging from their recent decision to release 30 terrorist detainees with no plan on where to put them, it continues to beg the question,” referring to Obama’s closure of the Guantanamo Bay detention center without knowing where the detainees will be sent.

IMF Chairman: 2010 Could Be End of Recession

Jonathan Bronstein, Talk Radio News Service

Since the economic crisis began in 2008, many people have been clinging to the hope of hearing positive news regarding to the economy. Recently, Dominique Strauss-Kahn, the current chairman of the International Monetary Fund (IMF), delivered some optimistic news, as he believes that 2010 could be end of recession.

“The free-fall in the global economy is beginning to abate,” said Strauss-Kahn in an optimistic tone.

But Strauss-Kahn believes that the governments must take three steps in order to bring this current recession to a close. 

Firstly, financial sector reform, as “it is essential there is no way in the global economy without this,” said Strauss-Kahn. Governments must work to cleanse the banks balance sheets and attempt to re-capitalize the banks in order to prevent “zombie banks,” banks that keep “toxic” assets on their bank sheets, from taking hold and keeping nations in a prolonged recession.

Secondly, the need for a global and coordinated fiscal stimulus, and the IMF asked for a 2 percent global stimulus, and “I must say that globally the government delivered at the global level,” said Strauss-Kahn, who continued to say, “and for 2009 we [the world] has what it needs.” Not only was Strauss-Kahn pleased that the world heeded the warnings of the IMF, but also implemented them at a similar time, which marked a more unified response.

Thirdly, Strauss-Kahn wanted urgent action taken by the national governments on the financial front in order to keep the banks solvent, and to alleviate any pressure in emerging markets. “This is the area where the G-20 was boldest in tripling the resources of the IMF, its lending capacity, to an unprecedented $750 billion,” said Strauss-Kahn.

However, Strauss-Kahn had sobering news regarding the present, as he believes that no matter how much stimulus is placed into the economy this year, 2009 will be seen by future generations as a lost year of economic growth.

“2009 will almost certainly be an awful year; we expect global growth to enter deeply negative territory,” said Dominique Strauss-Kahn, the current chairman of the International Monetary Fund.

While 2009 may be a bleak year; one must not overlook the positive indicators in the economy, like the NASDAQ recently reaching its 5-month high, which illustrate the resilience and strength of the economy. 

Strauss-Kahn continued to outline the 4 desires of the IMF in order to prevent another economic crisis, they are: better regulation of financial markets, civilian watchdogs on the “corner between main street and Wall Street,” international cooperation and financial arrangements between nations in economic troubles and the IMF so the stipulations that accompany the loan are not too stringent.

“In future time people do believe the United States economy will get better and is most secure,” said Strauss-Kahn, and for this reason the dollar will continue to be seen as the last bastion of security, even during the most tumultuous times. 

In fact, the dollar has continued to appreciate against competing currencies, like the Euro and Yen, even during this crisis, which according to Strauss-Kahn illustrates how at the end of this recession, “the dollar will still be supreme.”

Strauss-Kahn concluded by harkening back to his prediction that the crisis would ease in 2010, when he said “it is time to move forward and if we do move forward in the correct way than the recovery of the global economy in the first-half of 2010 will be a correct forecast.” 

Will the U.S. be put in timeout at the G-20 summit?

by Christina Lovato, University of New Mexico-Talk Radio News Service


“Now the G-20 is not an easier group to get into a consensus, it’s very much harder,” said Jeremy Rabkin, a Professor of law at George Mason University School of Law.

Today at a discussion on the upcoming G-20 meeting in London, panelists expressed their concerns about the meeting, the topics that should be addressed, and the likely results from the meeting.

J.D. Foster, a Senior Fellow in the economics of fiscal policy at the Thomas Roe Institute for Economic Policy Studies of the Heritage Foundation, said there are three issues at stake in the summit, the first being stimulus spending. “Should it be an international priority? Second, international institutions.... Should entirely new institutions of global governance be created? And third, underlying the both of the first two questions is the question of sovereignty. Should nations retain the basic right to regulate their own markets even if the result is that their systems of regulation differ?" Foster also said that at the summits they take on the task of lecturing one another usually on things that they themselves are not doing very well. "In this case we hope very much that the American president, President Obama, heeds some of the lectures of his European counterparts. It is a shameful situation to find ourselves in where we hope the European leaders are effective in lecturing the American president on the dangers of debt finance but that’s where we are.” Foster went on to say that people all over the world have the right to be angry with the U.S. “The Czechs, the French, the Germans, everybody else in the world is right to be angry at the United States and other governments engaged in this sort of enormous debt finance stimulus which won’t work, but they should be more than concerned; they should be furious. They should be furious because this is going to drive up interest rates at some point.... It will be affecting global financial markets,” concluded Foster.

Desmond Lachman, a Resident Fellow at the American Enterprise Institute for Public Policy, said “Europe to me looks like it’s basically in denial. Japan has run out of policy instruments.... interest rates are at zero. China is still counting on exports, really not being flexible on its exchange rate or trying to modify its economy..... You know that I think they diagnosed the problem correctly,” he said. Lachman went on to say, “I think what they have done is executed rather poorly.” Lachman expressed that the the fiscal stimulus package was poorly designed and that the Geithner plan is not attacking the problem in the banking system, saying that the problem is not one of liquidity but of solvency.

Rabkin stated that he thinks it is very unlikely that we are going to see enhanced global governance as the outcome of G-20 deliberations and said that the G-20 group is science fiction. “The majority of these countries are poor and somewhat chaotic. The idea that you’re going to propose a elaborate system of global controls, and ‘China’ will say yeah good idea we really want people to come into our country and monitor how we do our regulation. I think it’s fantastical,” he concluded.

Republicans move for stimulus package free of spending

By Michael Ruhl, University of New Mexico - Talk Radio News Service

It may seem like magic to some these days that one could stimulate the economy without spending a nickel, but that’s exactly what Senator David Vitter (R-LA) and 40 other Congressmen are proposing. A bill to be introduced concurrently in both the Senate and the House would provide revenue and create jobs by drilling for oil domestically. The focus of The No Cost Stimulus Act of 2009 would be primarily energy, because in addition to further tapping domestic gas and oil reserves, it would streamline the process for creating nuclear power plants, which the bill sponsors say would create jobs. According to the sponsors, it would also lessen EPA regulation of CO2 under the Clean Air Act, which the Congressmen claimed would save 500,000 jobs annually and saves over $7 trillion in GDP over the next 20 years.

Congressman John Shadegg (R-AZ) said that currently we are outsourcing our energy production, providing jobs to regimes such as Russia, Venezuela, and Saudi Arabia, when these very same jobs can be done domestically with our reserves.

The specific regions to be further tapped for their energy potential include the Outer Continental Shelf (OCS) and ANWR, which the Congressmen estimate alone would create nearly 2 million long term high paying jobs.