AIG CEO Liddy Asked To Testify By House Committee

NU Online News Service, April 27, 3:25 p.m. EDT

WASHINGTON–American International Group Chief Executive Officer Edward Liddy has been asked to testify before a House oversight committee May 6 on what caused the downfall of AIG.

An AIG spokesman said today she would check into the status of the invitation.

The request was made by Rep. Edolphus Towns, D-N.Y., chairman of the House Oversight and Government Reform Committee.

In an April 22 letter, Rep. Towns also asked Mr. Liddy to testify as to whether federal financial assistance was the only "thing that could save the company" and what AIG has done with its billions in federal financial assistance.

Mr. Towns also told Mr. Liddy to be prepared to answer whether AIG will need federal financial assistance beyond that already announced and what is AIG doing to stabilize the company.

The government took control of 79.9 percent of AIG on Sept. 16, 2008 in exchange for an aid package of up to $85 billion, a package that has since been revised three times.

According to AIG and government data, the company currently owes the government $80 billion–$40 billion in capital drawn from the Troubled Asset Relief Program and $40 billion drawn from a $60 billion Fed-funded credit facility.

The Government Accountability Office estimates the government involvement in AIG at $173 billion, but according to AIG officials, that includes its estimate of the government's total investments in AIG.

Rep. Towns also asked that Mr. Liddy be prepared to testify as to the solvency of AIG's insurance operations and how this kind of disaster can be prevented in the future.

The session with Mr. Liddy would be the second time the panel has called witnesses about AIG. On April 2, the committee heard from Maurice Greenberg, the former AIG CEO and chairman who was forced out during an accounting scandal at the company.

Mr. Greenberg said that after he left, the successor management, including Mr. Liddy, failed to pay attention to the AIG Financial Products unit that put the company deeply in the red. There was no "control and management oversight at AIGFP," he said.

He also told the committee that the government plan to bail out AIG has failed, and that selling the company at this time "would bring the government only pennies on the dollar for their investment in AIG."

It would have been cheaper, Mr. Greenberg said, for the government if it had walled off AIG Financial Products "and provided guarantees to AIGFP's counterparties, rather than putting up billions of dollars in cash collateral to those counterparties."

"Guarantees would have sufficed," Mr. Greenberg said.

He said AIG's problem was a liquidity problem, not a solvency problem. In such circumstances, Mr. Greenberg said, "the goal of government should be to provide temporary liquidity to save jobs and keep the gears of the financial situation operating smoothly."