NU Online News Service, MAY 13, 3:55 p.m.EDT

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WASHINGTON–American International Group Chairman andChief Executive Officer Edward Liddy told a congressional paneltoday he hopes AIG can repay all money owed the government withinthree-to-five years.

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But, he cautioned, full payback will only come if the marketscooperate.

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"Asset values have to stay strong," he said. "There has to be acapital market that allows us to take businesses public."

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Mr. Liddy made his comments in testimony before the HouseCommittee on Oversight and Government Reform.

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He testified after an opening statement by the panel's chairman,Rep. Edolphus Towns, D-N.Y., in which the congressman said thatordinary taxpayers are indignant about the government's need tobail out AIG and are demanding transparency in the process.

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"We are hearing, 'Trust us,' but we are not willing to let $180billion go just on trust," Rep. Towns said. "We will question; wewill inquire; we will verify."

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In his specific comments, Mr. Liddy said, "If the marketplaceholds the way it is right now, we think that the American taxpayerwill be fully repaid."

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He said AIG is now using $40 billion of funds under thegovernment's Troubled Asset Relief Program, has a $43 billion loanfrom the Federal Reserve Bank of New York, and access to $30billion more from the Fed.

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He did not speak of other guarantees, for example, the fact thatthe government is guaranteeing short-term credit needed by itsInternational Leasing subsidiary. And, the government has alsoadvanced cash to AIG in return for certain assets formerlycollateralized by devalued residential mortgage-backed securitiesowned by its life insurance subsidiaries. Those assets are beingheld in "Maiden Lane" facilities created by the Fed Bank of NewYork.

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At the same time, he said the Treasury Department is completingregulations that will govern AIG's bonus policy–a flashpoint in therecent past that has generated intense criticism not only for thecompany but also for the Obama administration and Fed officialsinvolved in the bailout.

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In other comments, he said that Treasury Department and FederalReserve Board officials are playing a key role in strategic andpolicy decisions at AIG, and the company should never have gottenitself involved in the trading of derivatives and securities.

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Instead, he said, the company should have stuck to its coreinsurance business.

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In response to a question from a member of the committee, hevoiced support for state insurance regulation. But, he said, it iscritical that Congress add to that a systemic regulatory process asproposed in testimony last week before the Senate Banking Committeeby Sheila Bair, chairman of the Federal Deposit InsuranceCorporation.

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Ms. Bair proposed that a committee of federal regulators havethe authority to preempt an institution's primary regulator,regardless of the securities products it sells, if that institutionengages in activities that could constitute a systemic risk.

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While Ms. Bair supports a committee, the Obama administration,especially Treasury Secretary Timothy Geithner, indicated last weekthat it supported the Federal Reserve Board for that role.

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In her testimony, Ms. Bair also proposed creation of aresolution authority that would have the power to take control of apotentially systemically risky institution–regardless of size andthe products it sells–and either rehabilitate it or liquidateit.

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A spokesman for Rep. Barney Frank, D-Mass., chairman of theHouse Financial Services Committee, said it is unclear whenCongress will act on such legislation.

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"As you know, we have not scheduled legislative hearings or amarkup yet on the creation of a systemic risk regulator," saidspokesman Steve Adamske.

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"We will be prepared to move as soon as the legislation isready," he said. "Mr. Frank has discussed July 4th as a tentativetime to complete our committee's work, but that is not set instone."

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In response to questions from Rep. Towns and Darrell Issa,R-Calif., chairman and ranking minority member of the committee,Mr. Liddy also committed himself to sharing with certain members ofCongress or staff the company's confidential "Project Destiny"reorganization plan that he has described "as a multiyear road mapfor the restructuring of AIG."

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After conferring with AIG's outside counsel, he said he wouldprovide the document only if the particular officials who wouldhave access sign the same kind of confidentiality agreement signedby officials at the Fed and Treasury who have had a hand indeveloping the strategic plan.

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He said that to let the document become public knowledge wouldhurt AIG's competitive position by providing confidential marketingdata to competitors, and would as a result impair the company'sability to fully repay the government.

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"We intend to pay back the government as soon as possible," Mr.Liddy said in response to another question.

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"We hope we can start that in a matter of months," he added,noting that Treasury and Fed officials "are very involved" withAIG, in meeting with internal committees and its board.

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