    [House Hearing, 111 Congress]
    [From the U.S. Government Publishing Office]

                   AIG: WHERE IS THE TAXPAYERS' MONEY GOING?

    =======================================================================

                                    HEARING

                                   before the

                             COMMITTEE ON OVERSIGHT
                             AND GOVERNMENT REFORM

                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED ELEVENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  MAY 13, 2009

                                   __________

                               Serial No. 111-19

                                   __________

    Printed for the use of the Committee on Oversight and Government Reform

      Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                                   index.html
                          http://www.house.gov/reform

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    53-019 PDF                WASHINGTON : 2009
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                  COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                       EDOLPHUS TOWNS, New York, Chairman
    PAUL E. KANJORSKI, Pennsylvania      DARRELL E. ISSA, California
    CAROLYN B. MALONEY, New York         DAN BURTON, Indiana
    ELIJAH E. CUMMINGS, Maryland         JOHN M. McHUGH, New York
    DENNIS J. KUCINICH, Ohio             JOHN L. MICA, Florida
    JOHN F. TIERNEY, Massachusetts       MARK E. SOUDER, Indiana
    WM. LACY CLAY, Missouri              TODD RUSSELL PLATTS, Pennsylvania
    DIANE E. WATSON, California          JOHN J. DUNCAN, Jr., Tennessee
    STEPHEN F. LYNCH, Massachusetts      MICHAEL R. TURNER, Ohio
    JIM COOPER, Tennessee                LYNN A. WESTMORELAND, Georgia
    GERALD E. CONNOLLY, Virginia         PATRICK T. McHENRY, North Carolina
    MIKE QUIGLEY, Illinois               BRIAN P. BILBRAY, California
    MARCY KAPTUR, Ohio                   JIM JORDAN, Ohio
    ELEANOR HOLMES NORTON, District of   JEFF FLAKE, Arizona
        Columbia                         JEFF FORTENBERRY, Nebraska
    PATRICK J. KENNEDY, Rhode Island     JASON CHAFFETZ, Utah
    DANNY K. DAVIS, Illinois             AARON SCHOCK, Illinois
    CHRIS VAN HOLLEN, Maryland
    HENRY CUELLAR, Texas
    PAUL W. HODES, New Hampshire
    CHRISTOPHER S. MURPHY, Connecticut
    PETER WELCH, Vermont
    BILL FOSTER, Illinois
    JACKIE SPEIER, California
    STEVE DRIEHAUS, Ohio
    ------ ------

                          Ron Stroman, Staff Director
                    Michael McCarthy, Deputy Staff Director
                          Carla Hultberg, Chief Clerk
                      Larry Brady, Minority Staff Director

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on May 13, 2009.....................................     1
    Statement of:
        Feldberg, Chester B., trustee, AIG Credit Facility Trust;
          Jill M. Considine, trustee, AIG Credit Facility Trust;
          Douglas L. Foshee, trustee, AIG Credit Facility Trust; and
          Professor J.W. Verret, George Mason University School of
          Law........................................................    72
            Considine, Jill M........................................   117
            Feldberg, Chester B......................................    72
            Foshee, Douglas L........................................   118
            Verret, Professor J.W....................................   119
        Liddy, Edward M., chairman and CEO of American International
          Group, Inc.................................................    12
    Letters, statements, etc., submitted for the record by:
        Connolly, Hon. Gerald E., a Representative in Congress from
          the State of Virginia, prepared statement of...............   141
        Feldberg, Chester B., trustee, AIG Credit Facility Trust;
          Jill M. Considine, trustee, AIG Credit Facility Trust; and
          Douglas L. Foshee, trustee, AIG Credit Facility Trust,
          prepared statement of......................................    75
        Issa, Hon. Darrell E., a Representative in Congress from the
          State of California, prepared statement of.................    10
        Liddy, Edward M., chairman and CEO of American International
          Group, Inc., prepared statement of.........................    15
        Towns, Chairman Edolphus E., a Representative in Congress
          from the State of New York:
            Information concerning the Federal Reserve Bank..........    50
            Prepared statement of....................................     4
        Verret, Professor J.W., George Mason University School of
          Law, prepared statement of.................................   122

                   AIG: WHERE IS THE TAXPAYERS' MONEY GOING?

                                  ----------

                            WEDNESDAY, MAY 13, 2009

                              House of Representatives,
                  Committee on Oversight and Government Reform,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 10:05 a.m., in
    room 2154, Rayburn House Office Building, Hon. Edolphus Towns
    (chairman of the committee) presiding.
        Present: Representatives Towns, Kanjorski, Maloney,
    Cummings, Kucinich, Tierney, Clay, Watson, Lynch, Connolly,
    Kaptur, Kennedy, Van Hollen, Cuellar, Hodes, Welch, Foster,
    Speier, Issa, Burton, Mica, Souder, Westmoreland, McHenry,
    Bilbray, Jordan, Flake, and Fortenberry.
        Staff present: Beverly Britton, counsel; Kwane Drabo,
    investigator; Brian Eiler, investigative counsel; Linda Good,
    deputy chief clerk; Jean Gosa, clerk; Adam Hodge, deputy press
    secretary; Carla Hultberg, chief clerk; Marc Johnson and
    Ophelia Rivas, assistant clerks; Phyllis Love and Christopher
    Sanders, professional staff members; Mike McCarthy, deputy
    staff director; Jesse McCollum, senior advisor; Amy Miller,
    special assistant; Leah Perry, senior counsel; Jenny Rosenberg,
    director of communications; Joanne Royce, senior investigative
    counsel; Ron Stroman, staff director; Lawrence Brady, minority
    staff director; John Cuaderes, minority deputy staff director;
    Jennifer Safavian, minority chief counsel for oversight and
    investigations; Frederick Hill, minority director of
    communications; Dan Blankenburg, minority director of outreach
    and senior advisor; Adam Fromm, minority chief clerk and Member
    liaison; Kurt Bardella, minority press secretary; Christopher
    Hixon, minority senior counsel; Ashley Callen, minority
    counsel; and Brien Beattie and Molly Boyl, minority
    professional staff members.
        Chairman Towns. The committee will come to order.
        Good morning and thank you for being here today. Eight
    months ago the American taxpayers came to the rescue of AIG
    with an $85 billion bail-out.
        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 the
    AIG. Yet, much of what has been done with that money has been
    done in the dark. In fact, the one thing that stands out most
    about the collapse and Federal rescue of AIG is the shroud of
    secrecy that has blanketed the entire sequence of events. This
    secrecy has only made the situation worse.
        I get the sense when I talk to people back home in Brooklyn
    that they simply don't understand what happened. And, let me
    point out they don't like the idea that their tax dollars are
    being used to bail out a big business. They want to believe
    that this Federal bailout is necessary, but they wonder whether
    the money is being used wisely and they want assurances that
    ultimately they want to get their money back. What is the plan
    to repay the American people, and does it have a realistic
    chance of working?
        Are the trustees adequately protecting the interest of the
    American people? In my view, AIG needs to demonstrate that it
    is headed in the right direction. We need to understand what
    the long-range plan is for AIG. Are you going to liquidate it
    or are you going to restructure it in such a way as to return
    it to profitability and repay the taxpayers' investment?
        According to testimony we will hear today, AIG plans to
    liquidate much of the company and spinoff its insurance assets.
    Does liquidating the assets in the midst of a bear market make
    sense? Will this plan maximize the returns of the company in
    today's economic client?
        We know AIG agreed to sell their auto insurance unit. We
    hear they are negotiating the sale of their Tokyo headquarters
    building, a unique property adjacent to the Imperial Palace.
    Will the taxpayers get the best return on their investment by
    selling a premier property during the worst commercial real
    estate market in years?
        A few days ago we learned that 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 goal for the benefit
    of American taxpayers. AIG says it is consulting on the issue
    with the New York Feds. In other words, ``Trust us. Don't rush
    us.'' Everything will be all right, but everything is not all
    right.
        People in my district and throughout the country are
    hurting, yet AIG has spent millions of dollars on high-priced
    PR firms and big time lawyers to attack its critics. AIG is
    paying PR executives as much as $600 an hour in taxpayer
    dollars. Clearly, AIG is making sure its lawyers and PR firms
    are watching its back, but who is watching the backs of the
    American people? The taxpayers.
        What should the American people think, when millions of
    dollars in bonuses are paid to the very people who caused AIG
    problems in the first place? Less than a week ago, the AIG
    trustees still felt it necessary to write to Mr. Liddy and urge
    him to get executive compensation under control. I am surprised
    and disappointed to see that AIG continues to argue for
    secrecy. And 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 on ``trust us.'' We will question. We
    will inquire. We will verify and we will not hesitate to probe
    every aspect of AIG's management and operations to protect the
    taxpayers' investment.
        It is our responsibility to ensure that those public moneys
    are spent wisely, legally, and in the best interest of the
    American people. And we will continue to do just that. The
    question we are raising today should be easy enough to answer,
    but unfortunately AIG has failed to fully respond to
    straightforward requests for information. This cannot continue.
    As AIG moves forward it has to know that Main Street is just as
    important as Wall Street.
        I am looking forward to hearing today from Mr. Liddy and
    also the AIG Trustees. On that note, I now yield to the ranking
    member, Congressman Issa from the State of California.
        [The prepared statement of Chairman Edolphus E. Towns
    follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Issa. Maybe Florida someday, Mr. Chairman. Thank you,
    Mr. Chairman, and thank you for facilitating this hearing today
    over the administration's management of $190 billion in bail-
    out money.
        I think it's reasonable to say that most Americans, even
    Bill Gates, cannot break $190 billion down into a meaningful
    increment. So, hopefully, accurately, I divided the 300 million
    or so Americans into that and found it's about $633 for every
    man, woman and child in this country, plus or minus the latest
    census.
        Mr. Chairman, I voted against these bail-outs; however, I
    am in the minority, so I have to accept the policies given to
    me until the American people get their chance to vote on a
    different policy. And I have an opportunity as the ranking
    member to demand transparency and accountability on behalf of
    the American people who have a right to know how their money is
    being spent. And, Mr. Chairman, I want to thank you for being
    an equal partner in ensuring that we have that opportunity on a
    bipartisan basis in this important investigation.
        Ensuring transparency and accountability for the more than
    $190 billion of taxpayers money injected into AIG is a key
    component of this committee's responsibilities. Just last week
    we learned AIG paid $454 million in bonuses to its employees in
    2008, while in March we were told it was only $120 million.
    While I understand that there is confusion and it may be that
    in fact the blame is based on different questions asked to
    different people in the process of getting the information,
    this confusion illustrates as much the serious problem in
    government trying to manage a company this large and this
    complex.
        The continued lack of transparency in this administration's
    bail-outs adventures, and I just admit much like the previous
    administration caused me to say, ``How dare we find out drip by
    drip by drip that our government has no ability to say how much
    money has been spent or on what? How much longer can the
    American people tolerate the lack of transparency?''
        I am pleased that Mr. Liddy is here today and I want to
    acknowledge that he did not create the problems at AIG, but
    instead has taken on the very difficult challenge of unwinding
    an incredibly complex company while facing tremendous scrutiny
    from the public and from those of us here in Congress. I want
    to personally say to Mr. Liddy today we will make every effort
    to make this about how we can work together; how we can achieve
    the transparency the American people are entitled to; and how
    we can do no harm to your efforts to maximize the return to all
    the stockholders of AIG; and, particularly, we are going to be
    asking about 80 percent that the American people own.
        Mr. Chairman, President Obama has promised the American
    people an unprecedented level of transparency and
    accountability, and I see our role on the committee as one of
    holding the President to that promise; and, that includes
    understanding the role of the three powerful individuals who
    now head the AIG trust. As designed by Treasury Secretary
    Geithner, when he ran the New York Fed, I believe that this
    trust is inherently unconstitutional, unaccountable entity that
    manages the taxpayers' investments in AIG, not for the
    taxpayers, but in the interest of the Federal Government,
    specifically the U.S. Treasury.
        It is important to remember, Mr. Chairman, that those two
    things are not one and the same. The U.S. Treasury is in fact
    not the same as the American people who have invested $633 for
    every man, woman, and child into this company. I want to
    acknowledge also that for the second panel, the trustees, they
    did not create this problem, and they will not be held
    accountable for what was created. However, since they now
    control 80 percent of the stock of AIG on behalf of, I believe
    should be the American people and not just the best interest of
    the Treasury, we must question why AIG trustees are immune from
    legal liability, so long as they act in the best interest of
    the Treasury and are indemnified against any lost cost or
    expense of any kind or character whatsoever.
        Who can tell, Mr. Chairman, in light of recent public
    bullying of Chrysler bondholders who were derided as
    speculators by President Obama that these causes insulate the
    trustees from the normal accountability and transparency we
    demand of all our representatives. The ``New York Times''
    recently reported that this unprecedented trust structure
    provides cover for officials, who despite the government's
    large stake in various banks, want to preserve the notion that
    neither the Treasury or the Fed owns AIG or controls any banks.
        Mr. Chairman, I would submit that this is inappropriate for
    regulators and bureaucrats to use this legal sleight of hand to
    obscure the influence in running the U.S. financial sector. The
    American people have a right to know what is being done with
    their money and how these companies are being run.
        Mr. Chairman, I look forward to our witnesses. I appreciate
    your indulgence, and would ask that additional material be
    placed in the record so as to preserve time and yield back.
        Chairman Towns. Without objection.
        [The prepared statement of Hon. Darrell E. Issa follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Towns. Thank you very much, Congressman Issa.
        I now ask unanimous consent to leave the record open to
    Members who may submit their opening remarks and questions for
    the record, and I will leave the record open for that. At this
    time, I would like to ask the witnesses to please stand, and
    swear in all of our witnesses.
        [Witnesses sworn.]
        Chairman Towns. Let the record reflect that they answered
    in the affirmative. You may be seated. I'm sorry. We have the
    lights here. When we start out, it's on green. Then it goes to
    yellow, and then it's red. So when it gets on yellow you can
    start trying to wrap up, which will allow all the Members an
    opportunity to raise questions. And maybe something that you
    didn't say you will get a chance to say it during the question
    period.
        OK. You may begin.
        [Mic was off.]
        Mr. Liddy. Let me start over.
        Mr. Issa. You'll never be misquoted until you turn it on.

      STATEMENT OF EDWARD M. LIDDY, CHAIRMAN AND CEO OF AMERICAN
                       INTERNATIONAL GROUP, INC.

        Mr. Liddy. Mr. Chairman, Ranking Member Issa, members of
    the committee, thank you for the invitation to appear before
    you today.
        I appreciate the opportunity to describe for the committee
    the business plan we are executing in order to put AIG's
    troubles behind it, to repay the moneys that we owe the
    American taxpayer, and to secure an outcome that helps to put
    the American economy back on track. We are working hard to
    determine the destiny of the component parts of AIG.
        Our plan contemplates that AIG's best businesses will
    establish separate identities from the parent holding company.
    The parent company will become smaller. The Financial Products
    unit will cease to exist. How long the plan will ultimately
    take will very much depend on how quickly and how strongly the
    global economy recovers, but let me be clear.
        Our plan is explicitly designed to avoid having to divest
    AIG assets at fire sale prices. Just the opposite is true. We
    intend for taxpayers to realize the fullest possible value from
    every asset disposition, and we have already made substantial
    progress in this restructuring. We have reduced but not yet
    eliminated the systemic risk that AIG presents to the global
    financial system. We are selling assets where possible despite
    adverse conditions in global financial markets.
        We are stabilizing AIG's liquidity so that we do not need
    support beyond those amounts already authorized by the
    government; although, as I said, the economy will be a factor
    in this. And we are restructuring some businesses for public
    offerings. We are restructuring other businesses for later
    disposition or to be wound down so that future losses can be
    mitigated or avoided. Across these four areas we have in recent
    weeks achieved a number of important milestones.
        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. We expect to complete the contractual
    arrangements for these transfers in the near future. We are
    also transferring the global property and casualty insurance
    franchise, known as AIU holdings, into an SPV, a special
    purpose vehicle. This will secure the value of that very
    substantial business in preparation for the potential sale of a
    minority stake, which ultimately may include a public offering
    of shares, again depending upon market conditions. And we
    continue to make significant progress in winding down AIG
    Financial Products. We have reduced the FP risk positions from
    44,000 to 27,000 and we have reduced the notional exposure from
    a peak of approximately $2.7 trillion to just under $1.5
    trillion today.
        We continue to weigh every action with several criteria in
    mind. Will it reduce systemic risk? Is it the best use of
    Federal assistance? Will it enhance our ability to pay back the
    government? Does it keep our insurance businesses strong and
    well-capitalized? And does it protect our policyholders?
        We are working hard to improve governance at the company.
    AIG is an incredibly complex entity with over 4,000 legal
    entities, cross-ownership and a myriad of special purpose
    structures. Our restructuring plan must make AIG less
    complicated, less risky, and more transparent. The infusion of
    government capital to AIG brought with it a substantial new set
    of relationships with the American taxpayer as AIG's largest
    single shareholder with the taxpayers' representatives here in
    Congress, with the Federal Reserve and U.S. Treasury; and, more
    recently, with the Trustees also appearing today. These
    relationships are new and in many ways unprecedented.
        We work closely with the Federal Reserve Bank of New York
    and the U.S. Treasury; representatives of the Fed and Treasury
    and their advisors are engaged with various AIG offices every
    day. We view them as our partners. We also consult closely with
    the Trustees, and we appreciate the time they have devoted to
    understanding our restructuring plan and other critical issues.
    Their mature business judgment is a major asset.
        I have led AIG now for 8 months, almost 8 months, and I
    want to assure you that the people at AIG today are working as
    hard as we can to serve our policyholders, our customers, and
    taxpayers. We need your help as well. It's critical to remember
    that we are partners. When we at AIG make mistakes, we expect
    to be criticized, but rampant, unwarranted criticism of AIG
    serves only to diminish the value of our businesses around the
    world, the businesses we are attempting to sell to repay the
    American taxpayer.
        We continue to welcome a frank and open dialog with
    Congress so that you can be in a position to support our
    efforts. This support is essential and will benefit AIG
    stakeholders, the American taxpayer most of all. We cannot
    control the market conditions that will partly determine the
    timing of AIG's restructuring, but we are confident that our
    approach is right and that if we do this together we can
    demonstrate to the world that responsible government and
    capitalism still strive in the United States.
        Mr. Chairman, thank you again for the opportunity to appear
    before you today; and, I am happy to answer questions that you
    or the committee might have.
        [The prepared statement of Mr. Liddy follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Towns. Thank you very much for your testimony.
        You know, AIG has received over $180 million in financial
    assistance. Can you provide this committee with assurances that
    AIG will not require any additional Federal money?
        Mr. Liddy. Congressman, the assurance I can give you is we
    will do everything we can to not require additional Federal
    money. But the answer to that question, as I said in my
    prepared remarks, is so dependent upon what happens to the
    world economic conditions; and, perhaps more particularly, the
    world financial markets; we think the money that's been
    dedicated to us thus far--that's $40 billion of TARP money and
    approximately $43 billion of Federal Reserve borrowings, when
    coupled with another $30 billion of TARP, just under $30
    billion of TARP that is available to us and the balance of the
    Federal Reserve borrowing--we think in today's marketplace that
    is sufficient and we will not need additional money. But that
    answer is very dependent upon what happens to the overall
    economic conditions and financial marketplace around the globe.
        Chairman Towns. Well, can you assure us that the taxpayers
    will get their money back?
        Mr. Liddy. Again, I'll assure you we're doing everything we
    can. We have what we think is a terrific plan, a viable plan
    that's not as dependent on the capital markets as other plans
    might have been. But asset values have to stay strong. There
    has to be a capital market that enables us to take businesses
    public. I think that will happen, but I can't give you a
    guarantee on that. I can't control what happens in the
    worldwide financial marketplace.
        Chairman Towns. Does ``Project Destiny'' provide that the
    taxpayers will recover 100 percent of their money?
        Mr. Liddy. It does. Project Destiny, as you indicated in
    your remarks, basically provides a strategy for each business
    that comprises AIG, and if the marketplace holds the way it is
    right now, we think that the American taxpayer will be fully
    repaid. Again, that's very conditioned upon, the assumption
    that the world economy and the world financial markets stay
    where they are or improve as opposed to deteriorating.
        Chairman Towns. Right. Last week I wrote to you requesting
    a copy of your plan for the future of AIG called ``Project
    Destiny.'' Your outside lawyers sent me a letter on Monday
    saying it was too sensitive to give to the committee and you
    were discussing it with the New York Feds. Are you trying to
    hide something? I mean, why can't we get it?
        Mr. Liddy. No. I'm prepared to share with you the broad
    brush strokes of that plan for as long as you'd like. When we
    get into the operating details, that is commercially sensitive
    material. There's a lot of people with whom we compete in the
    United States and around the globe. And to the extent they have
    access to that information it would impair our ability to
    operate those assets and sell those assets for the benefit of
    the taxpayer.
        Chairman Towns. Let me ask one other question. Who's in
    charge of AIG, you or the New York Fed?
        Mr. Liddy. AIG is a shareholder-owned company and we
    operate according to that, because the largest single
    shareholder we have is the American public through an 80
    percent ownership. The Federal Reserve and the U.S. Treasury
    are our partners. We don't do anything without reviewing it
    with them, making certain that they are in concurrence with it.
    So it is very much a partnership in terms of the way we think
    about making decisions.
        Chairman Towns. Right. So for the record, Mr. Liddy, I want
    your commitment that you will provide us with a copy of
    ``Project Destiny'' by the close of the business day.
        Mr. Liddy. I'll talk to my lawyers about it, sir. I want to
    provide you everything that you need to understand ``Project
    Destiny,'' but we are told and the Federal Reserve has asked us
    to be very careful with the amount of detail we describe.
    Because that information, as I said, could be very commercially
    sensitive in the hands of our competitors and it could destroy
    our ability to pay back the American taxpayer.
        So if you will let me please consult with our attorneys
    about what we can do with that, we will work with you and your
    staff to provide you what is feasible as quickly as we can.
        Chairman Towns. Yeah, that kind of goes to a comment that
    was made by the ranking member. You know, we were talking about
    transparency. I mean, in some instances some of this we just
    can't quite understand why we can't have it. And I want you to
    know that's a big issue as we walk the street. You know, people
    are saying that they're doing things in secrecy. They're
    talking about the bonuses that people are getting. And I think
    that's something that you have to be concerned about in terms
    of the image of AIG as well.
        Mr. Liddy. I'm very sensitive to it, sir, and that's why we
    share with the Federal Reserve and the U.S. Treasury everything
    that we're doing. There are no secrets. Everything that we are
    doing we share with them. I'm just uncomfortable that if all of
    the operating details of Project Destiny were to be made
    public, that it would put us at a severe disadvantage in terms
    of trying to realize value for the benefit of the American
    taxpayer.
        Chairman Towns. Do you honestly believe that you have a
    right to prevent Congress from reviewing how the taxpayers'
    money is being spent?
        Mr. Liddy. No. As I said, I'm delighted. I will share as
    much of the overall broad brushstrokes as I possibly can and I
    think that will satisfy you. It's the operating details of that
    plan that I am more concerned about.
        Chairman Towns. Thank you. My time is expired.
        I yield to the ranking member from California.
        Mr. Issa. Thank you, Mr. Chairman, and I would let you go
    on as long as you wanted to. You were doing extremely well.
        Mr. Liddy, I'm going to pick up where the chairman left
    off, because I think he's on the right track. Did you share
    this project in its entirety with individuals working for the
    New York Fed or Treasury?
        Mr. Liddy. Yes, we did.
        Mr. Issa. And was that in camera? And, if so, how did you
    make that determination that what you shared with them was not
    going to be shared with your competitors?
        Mr. Liddy. Well, the Federal Reserve is present at every
    one of our strategic discussions at all of our board meetings
    and all of our committee meetings.
        Mr. Issa. No. I appreciate what you're saying, but let me
    move to the point. The point is they're not stockholders.
    They're sitting as members of the board, members of your
    executive committee. They're operating your company in the
    sense that they're insiders. I sit on the board of a public
    company even today. I'm very familiar with the fact that what
    you're telling us you can't give us; and, you did tell us you
    couldn't give it to us, because you said you'd give us the
    broad brush, the overview.
        Basically, you said I won't share with you what I'm sharing
    with the Treasury. I'm going to ask you in a different way. I
    know you're going to talk to your lawyers, and Mr. Boggs back
    there is about the best in town. So maybe you just reach over
    your shoulder when you get a chance.
        Will you, given the same protections from disclosure to
    your competitors, make available to Congress the information? I
    understand the information is insider information, and people
    who have access to it need to understand they can't trade in
    the stock. They can't do other investments. Given those
    assurances, will you make that available to designated people
    from Congress?
        Mr. Liddy. Congressman, I will talk to my lawyer.
        Mr. Issa. Tommy's shaking his head no, so----
        Mr. Liddy. At some point in time, so he'll tell me what we
    can and cannot do and what we should and should not do.
        Mr. Issa. Mr. Chairman, can we suspend for a moment to give
    them a chance to talk to counsel?
        Chairman Towns. I'd be delighted to do so.
        Mr. Issa. Thank you.
        [Brief conference held.]
        Chairman Towns. Yes, you may continue.
        Mr. Liddy. Congressman, there is commercially sensitive
    information in there. My attorney advises me will work with you
    to provide everything that we possibly can. The material that
    goes to the Fed or Treasury goes pursuant to a confidentiality
    agreement; and, what we are concerned about, if it goes to
    Congress, does it give free access to our competitors. If we
    can find a solution to that, we'll provide it to you.
        Mr. Issa. And I appreciate that, so I'll rephrase the
    question for counsel.
        Assuming that we provide for in camera for lack of a better
    term review by individuals who have signed onto the
    confidentiality agreement a limited amount, not Congress as a
    whole, are you prepared to turn over to this committee's
    designated people for their evaluation, and we would presume.
    We would probably have knowledgeable people outside this.
        Mr. Liddy. Yes.
        Mr. Issa. The answer is yes?
        Mr. Liddy. Yes, again, exactly the way you worded it, as
    long as we can get assurances that it doesn't go beyond that
    group.
        Mr. Issa. OK, well, the chairman and I, I'm sure, will work
    together to find a way to make that happen because it is
    important that this branch of government have the same
    transparency as the other branch of government currently has on
    your government-owned entity.
        Let me just go through one or two more quick things. If I
    read the arithmetic roughly right, 80 percent of your company
    was bought for $40 billion by converting preferred to common.
    Is that roughly right?
        Mr. Liddy. Yes, except another $30 billion or just under
    $30 billion is available if we need it. So you need to decide
    whether you want to include that in the calculation or not.
        Mr. Issa. But that would further dilute the stock?
        Mr. Liddy. Well, it would keep the ownership at 80 percent,
    so you don't go above the 799.
        Mr. Issa. OK, so getting mark to market, if we will, what
    is the current value of your stock as an enterprise, your
    market cap?
        Mr. Liddy. It would be approximately $5 to $6 billion.
        Mr. Issa. So we spent $40 billion, agreed to spend $70
    billion to buy $5 billion?
        Mr. Liddy. Well, it's $5 billion plus what it can be worth
    at the end, if the ``Project Destiny'' execution goes well and
    the marketplace cooperates.
        Mr. Issa. But you are a publicly-traded company, so you are
    worth what you are worth on a given day. Your classic mark to
    market justification: you're worth $5 billion today; if I went
    into the market to buy I wouldn't have to pay $30 billion to
    get no more. I wouldn't have to pay $70 billion to get 79
    percent. I would pay a fraction of that if I bought into the
    other side of the equation. Is that right?
        Mr. Liddy. Yes. The company is worth as you say, the
    company is worth about $5 to $6 billion.
        Mr. Issa. OK. Additionally, the last point I'll make on the
    finances, the government lowered your rate to LIBOR plus one,
    roughly; or, no, LIBOR plus three. Your 3\1/2\, 4 percent cost
    of money on a big part of what the government has loaned you.
    Is that right?
        Mr. Liddy. Yes.
        Mr. Issa. So the government is making money, because we
    borrow for less than that, but that's commercially what? Less
    than half of what you would normally in your financial
    condition borrow at. Is that right?
        Mr. Liddy. Yes. I don't know whether half is the right
    number, but it's substantially less than what the rate would be
    if we were trying to borrow on our own.
        Mr. Issa. The BB&T's preferreds now are trading at par, at
    9 percent.
        Mr. Liddy. Right.
        Mr. Issa. So you're getting about half that.
        Mr. Liddy. Yes, it's extensions.
        Mr. Issa. So the government is not losing money on the
    loan, but in fact you're getting a preferential treatment which
    hopefully comes back in the stock.
        Mr. Liddy. Correct.
        Mr. Issa. OK, Mr. Chairman, I hope we have a second round,
    but thank you for the indulgence.
        Chairman Towns. We will. We will have a second round.
        I yield to the gentleman from Pennsylvania, Mr. Kanjorski.
        Mr. Kanjorski. Thank you, Mr. Chairman.
        Good morning, Mr. Liddy.
        Mr. Liddy. Good morning.
        Mr. Kanjorski. Since you last appeared before Congress, and
    that was several months ago, at that time you had indicated
    that when you took command at AIG it had counter-party
    obligations of approximately $2.7 trillion and you would reduce
    that to approximately $1.7 trillion at the last time you
    testified. Could you give us any indication where that exposure
    is today?
        Mr. Liddy. Yes, at its zenith, that number was $2.7
    trillion. At the end of the first quarter, at the end of April,
    it was down just below $1.5 trillion. So we continue to make
    progress. We continue to make good progress.
        Mr. Kanjorski. Do you have any timeframe in mind as to when
    you will get down to the level that there will not be systemic
    risk exposure to the taxpayers of the United States?
        Mr. Liddy. I do. First, we'd like to make progress and not
    every single month and every single quarter, but we think by
    the end of the year that $1.7 trillion and the 27,000 trades
    that exist will be materially smaller. The challenge is if you
    go too fast you wind up settling those trades at a disadvantage
    to us; and, therefore, it costs the American taxpayer more. So
    trying to do that with a little balance in the system is
    appropriate. We think we can get the right balance and make
    material progress by the end of the year.
        Mr. Kanjorski. Right, thank you.
        Did I detect in your response to the chairman and the
    ranking member in regard to providing your bailout plan of your
    plan of final execution that you have recorded or indicated
    exposure to Federal Reserve and Treasury--but have not made it
    available to the committee staff--is that because you may be
    suspicious of the congressional billboard company that we have
    up here on the Hill?
        Mr. Liddy. No, it reflects really just my concern that if
    that information gets out and gets in the hand of our
    competitors and it tells them what our roadmap is to resolve
    AIG's difficulties that they will use it against us, and it
    will make it even harder to achieve the success that we want to
    achieve. It's as simple as that.
        Mr. Kanjorski. I'm not criticizing your judgment in humor
    of the chairman's and the ranking member.
        The one thing I'm interested in, and you can be very
    helpful to us, you know, I am involved in another committee and
    we are writing and deciding on what we're going to do at the
    insurance industry; and, when you analyze AIG, you recognize,
    for all intents and purposes it was a wonderful and very
    successful insurance company, except it had, as some people
    call, rogue organizations or offshore organizations, the London
    group, the financial products division of AIG in London.
        They were really the organization that in getting involved
    in taking positions as counter-parties that they made the great
    opportunity of risk and weren't the best purchaser of those
    documents or situations, now that was not regulated, I take it,
    very stringently by your New York State regulator. Is that
    correct?
        Mr. Liddy. The financial products business was not
    regulated by any of the insurance regulators, because it wasn't
    an insurance subsidiary. It was regulated by the OTS.
        Mr. Kanjorski. OK, now, does OTS have a history or real
    experience with regulating that type of offshore operation to
    ICE success in your estimation?
        Mr. Liddy. I think not. I think the last time I was before
    Congress, I was part of a panel that included the interim
    director of the OTS and I think he said as much. They simply
    lack the capacity and the ability to adequately supervise
    businesses that were in Connecticut, London, Paris, Tokyo, what
    have you, dealing in these very complicated financial
    instruments.
        Mr. Kanjorski. After 9 months now, that's a short period of
    time relatively speaking to get the total lay of the land to
    understand the culture, but would you feel qualified to render
    an opinion at this point, that looking at the existence of not
    only AIG but several insurance companies that have the
    opportunities to do what they did in getting them to the
    offshore operation in London and getting into derivatives.
        Do you have any opinion as to whether or not it would be
    helpful and more protective to the American taxpayer to avoid
    their exposure and to the economy to avoid systemic risk if in
    some way we developed a Federal insurance charter that would be
    a regulator of that operation and much more closely involved
    than the present regulators have been. Can you render that
    opinion, first; and, if you can't, will you?
        Mr. Liddy. I can give you some preliminary thoughts. I
    don't know if it's a Federal insurance regulator as much as
    there needs to be someone who looks at systemic risk across
    large organizations, so in my judgment, it should have been a
    great insurance company and should have stuck to that knitting.
    It should not have gone off into the financial products world.
    Once it did, I think it would have been helpful if there was an
    overseer or regulator. Once a company gets to a certain size or
    engages in certain kinds of products, that company ought to be
    subject to some broad brush-stroke regulation, which I think
    right now does not exist.
        I saw that the individual, Sheila Bair, who heads up the
    FDIC, had a proposal where you bring together the heads of the
    Federal Reserve and Treasury, and FDIC, and they would share
    common knowledge about which institutions perhaps are engaging,
    either are too large or have too much systemic risk or are
    engaging in practices that could cause difficulty.
        That struck me as a sensible way of using the current
    regulatory environment, but getting more emphasis on those
    businesses that simply have become either too large or are
    engaging things that are outside of their core skills.
        Mr. Kanjorski. I think you are referring to Senator
    Collins' proposal in the Senate. Is that correct?
        Mr. Liddy. Yeah, I'm sorry. I don't know. When I first read
    it I thought it was part of an FDIC, part of Sheila Bair's
    recommendation, but I could have that entirely wrong.
        Chairman Towns. The gentleman's time is expired.
        Mr. Kanjorski. Thank you, Mr. Chairman.
        Chairman Towns. Congressman Bilbray from California.
        Mr. Bilbray. Thank you, Mr. Chairman.
        The chairman was rightfully saying the concerns of
    transparency and how far we can go with that just sort of
    reminded me of the fact that if you had a proposal for major
    bonuses for your executives, the proposal had billions of
    dollars out there. Would you ever propose to present them with
    that argument at midnight and expect them to vote on the
    commitment within by noon the next day?
        Mr. Liddy. No. I think my approach generally is to provide
    people the information they need in order to make an informed
    judgment.
        Mr. Bilbray. Well, do you think the 12 hours for a 1,000-
    page proposal would be appropriate time for consideration?
        Mr. Liddy. Well, as I said, I want to work with the
    Congress. I want to work with what you've asked for. I just
    want to make sure that I protect the interest of the American
    taxpayer at the back end of this process.
        Mr. Bilbray. I just pointed out, frankly, is that the
    representatives of the taxpayers, we were actually asked by our
    chief administrative officer of Congress to ask us to vote to
    make that kind of commitment within that short a period of
    time, where I don't think any executive for any company would
    ask their board of directors do that. But we were asked to do
    that, and that's when all-hell broke loose when they realized
    there was a whole lot in that proposal that wasn't there.
        Mr. Liddy. I understand.
        Mr. Bilbray. This issue of hyper-inflation coming down the
    pike is something we haven't talked about, and I just want to
    sort of get reassured that with all the hyper-spending that we
    are seeing the Federal Government do in the last few months and
    the projects were going to continue to do it, most economists
    feel there's a great threat that we'll go into hyperinflation.
        If hyperinflation kicks in, what are the results on our
    payback? Now, I assume that we will not be going dollar-for-
    dollar. It will be value to some degree, but will it be dollar
    and dollar, and will hyperinflation then reduce the net value
    of what was paid back to the Treasurer?
        Mr. Liddy. It's a great question. It's a very difficult one
    to answer, because hyperinflation would be accompanied by a lot
    of other factors, so you'd have to kind of go through a string
    of events. What would hyperinflation unleash?
        You know, if you owned real assets, fixed assets in a
    hyperinflationary period, that could be a good thing, because
    the value of those goes up, but there's nobody around that has
    any money in order to buy it. So you'd really have to step back
    and look at it. You know, our plan takes anywhere from 3 to 5
    years to fully unfold, given current market conditions.
        How quickly a hyperinflation scenario, if it were to occur,
    how quickly it would occur, don't know. So we could be well
    down the path toward realizing the repayment of the American
    taxpayer before any hyperinflationary situation were to occur.
        Mr. Bilbray. So in other words, you're hoping to be able to
    pay back the taxpayers before the ceiling falls in on the
    inflationary spiral?
        Mr. Liddy. Well, I'd like to make some major inroads into
    repaying the American taxpayer and I'm not so sure the ceiling
    falls in. As I said, hyperinflation will be one element. There
    could be a host of other things and some offsetting that come
    with that.
        Mr. Bilbray. OK. Here's the catch. The followup question
    here is how long you anticipate AIG to take to pay off the
    debts of the taxpayers.
        Mr. Liddy. Well, I think it will take somewhere between 3
    and 5 years; and, what makes the answer so difficult is in
    formulating a response you have to make a judgment about how
    strong will the economy be worldwide and how good will the
    capital markets be worldwide. If they stay about where they are
    or get better, it's that 3- to 5-year timeframe. If they were
    to get worse, it could get elongated.
        Mr. Bilbray. Has the administration given you any
    guidelines on when to start repaying AIG staff?
        Mr. Liddy. They have not given us any guidelines. We work
    with the Federal Reserve. Any time we use any of the dollars
    that have been allocated to us, we have to get a waiver from
    the Federal Reserve. It's our intent to try to start repaying
    that as quickly as possible. As I mentioned in my oral
    testimony, we want to take some of our largest assets, and put
    them in a special purpose vehicle. When we do that, the amount
    of debt that we've borrowed from the Federal reserve will be
    reduced proportionately. So we can do that in a matter of
    months, assuming we can get all the regulatory approvals for
    these special purpose vehicles done in that timeframe.
        Mr. Bilbray. To what extent have Federal Reserve officials
    been involved in the strategy of how to pay back this?
        Mr. Liddy. They have been very involved in it. As I said,
    we treat them as a full partner. We don't do anything without
    getting involved.
        Mr. Bilbray. So they're involved in day-to-day decisions
    involved here or is it just general policy?
        Mr. Liddy. No. I wouldn't say day-to-day decisions. I would
    say more strategy and policy. Sometimes it's hard to tell when
    you moved from strategy to a policy to a decision, but we just
    don't want them to be caught off-guard by anything that we are
    working on.
        Mr. Bilbray. OK. Thank you very much.
        Thank you, Mr. Chairman. I yield back.
        Chairman Towns. Thank you very much. The gentleman's time
    is expired.
        Congressman Cummings from Maryland.
        Mr. Cummings. Thank you very much, Mr. Chairman.
        Good morning, Mr. Liddy.
        Mr. Liddy. Good morning.
        Mr. Cummings. First of all I want to thank you for your
    comments about being concerned about the taxpayers.
        We too are concerned, and I heard your comments about
    criticism. Let me say this. When anyone is getting $182 billion
    of taxpayers' money, many of those taxpayers who have lost
    their jobs, savings, health insurance, you are going to get
    some criticism, no matter what. But let me go to something that
    Mr. Bernanke said, Fed Chair Bernanke said just a week ago; he
    said he had no problem with people receiving high paychecks. He
    said, but there should be a pay system that prevents excessive
    risk-taking and at the same time is directly related to
    performance. Do you agree with that?
        Mr. Liddy. Yes, I do.
        Mr. Cummings. And, so, I know that you have come under, AIG
    has come under criticism for these retention payments and the
    bonuses and whatever. What is being done consistent with
    Bernanke's statement that I just quoted to address that issue,
    if anything?
        Mr. Liddy. It's a great question, Congressman.
        Mr. Cummings. Thank you.
        Mr. Liddy. I would say the most important thing we can do
    is not allow a situation like AIG FP to ever get started again.
    So when AIG FP, the participants in that business generally got
    30 to 35 percent of the profits, that can encourage some risk-
    taking that simply is out of bounds. So the winding down of FP
    and the comp programs that we have in place up there right now
    are not nearly as lucrative.
        They are specifically targeted so that you get paid if you
    achieve certain objectives. So I think that is right on point
    with Chairman Bernanke's view that there's got to be a risk
    reward and a pay for performance standpoint. So I think we are
    making good progress on that. In the basic operations at AIG,
    we have almost always had that, you know, that is much more
    traditional-looking in terms of the leverage than there is on a
    bonus plan, how much of a relationship there is between a base
    salary and a performance-based bonus, and they are very
    performance-based. So in most areas at AIG I think we are in
    pretty good shape. It was more in the AIG FP area where I think
    the compensation systems got out of bounds.
        Mr. Cummings. So let me make sure I understand now. We had
    bonuses and retention payments, I think, in more than just FP.
    Right?
        Mr. Liddy. Yes. I was trying to respond to the specific
    part of Mr. Bernanke's comment that there ought to be a
    tradeoff between risks and rewards.
        Mr. Cummings. All right. Now, what can the American people
    expect as owners of 79 percent of this company with regard to
    bonuses and retention payments in, say, the next year? After
    all, and I am going to say this over and over again wherever I
    go, to losing their jobs, their homes, to losing everything.
    And so they have no sympathy for AIG.
        So I'm just wondering what can you tell them? They're
    watching you, about what they can expect to see as they're
    seeing the foreclosure signs go up in front of their houses.
    What can they expect to see in the ``New York Times'' and ``The
    Washington Post'' about bonuses and retention payments at AIG?
        Mr. Liddy. Specifically, with retention payments we are
    trying to recast as many of those as we can to make them
    performance-based so that you have to earn them, not simply
    stay for a certain period of time. As I am told there are
    Treasury regulations which will be forthcoming that will be
    very specific about how much you can pay, what base salaries
    are, what bonuses can be, how those bonuses can be paid. As
    soon as we get that material, we will revise our comp systems
    to be in 100 percent compliance with those regulations.
        Mr. Cummings. Last question: did AIG write swaps on any
    debt held by creditors to General Motors or Chrysler? And, if
    so, what can you tell me about those swaps?
        Mr. Liddy. I don't know. I saw that question someplace and
    I just don't have any information on it.
        Mr. Cummings. It is a very important question.
        Mr. Liddy. I'd be delighted to get the information.
        Mr. Cummings. How soon do you think we can get it?
        Mr. Liddy. We'll do it as quickly as we can, sir.
        Mr. Cummings. Yeah, we want to look into that very
    carefully; and, let me ask you this. On January 15th you told
    me when we met that you expected to be able to pay back the
    debt within 5 years. At that time, of course, I didn't know
    that AIG would have its largest loss in the history of any
    company in the world when we lost. What's your project today?
        Mr. Liddy. As I answered this Congressman over here, I
    think the answer is 3 to 5 years, but it is very dependent upon
    what happens to the capital markets. And that loss, as I have
    attempted to explain in the past to many of you, that loss had
    two major components. One was worldwide asset values plummeted
    in the fourth quarter.
        When asset values go down, we have to reflect that loss in
    our P&L and that's what drove that loss. Second, when you're
    worried about the components of your business, you have things
    like good will and deferred tax assets. You aren't going to be
    able to realize those and you write them off. Those two things
    alone were the major drivers of that loss.
        I think the answer, we will be able to repay the taxpayer
    in that 3- to 5-year timeframe, but it is heavily dependent
    upon what happens with the worldwide economic situation, the
    success of the stimulus programs that all of the world's
    governments are bringing to bear, and the condition of the
    financial markets. We are not an island and those issues play
    such a large role in our ability to make progress paying back
    the taxpayer.
        Chairman Towns. The gentleman's time is expired.
        I yield 5 minutes to Mr. Fortenberry.
        Mr. Fortenberry. Thank you, Mr. Chairman.
        If you decide to start a subcommittee on oversight of AIG I
    will volunteer to serve on it.
        Chairman Towns. That's good to know.
        Mr. Fortenberry. Mr. Liddy, thank you for coming. You are
    in a difficult position. I understand you are basically not
    paid for this. You have taken this on to restructure the
    company.
        In that regard I appreciate your willingness to do it. You
    very much understand though the cynicism with which very often
    your testimony is not because of the pent-up anger, and
    particularly in Congress, but more specifically among the
    American people about the reckless actions of this company
    previously.
        And in that regard I'd like to take a step back if we could
    and trace a process by starting with just a general question.
    Can you explain to the American people who is AIG? You were
    formerly organized as a thrift holding company. The various
    business components of that, the business sector or one of
    those components that went bad in terms of the creation of
    exotic financial instruments, and then how are you suggesting a
    restructuring of the company and management to deal with it?
        Mr. Liddy. Sure. AIG consists of a number of component
    parts, and let's just think about it as a string. There are
    property casualty businesses. There are worldwide life and
    savings businesses. There are domestic life and savings
    businesses. There's a couple of large businesses like
    International Lease Finance.
        I think we own more airplanes than any other entity in the
    world. And in that general area there's also the AIG Financial
    Products. So most of what I tried to describe very briefly just
    now is it's an insurance company with a few exceptions.
        One of those large exceptions was starting in about 1987 or
    so AIG got into a non-insurance business called AIG Financial
    Products, FP for short. And that's where we wrote very
    sophisticated derivatives, credit default swaps, hedges and
    things of that nature. The credit default swaps generally
    performed well until the complete liquidity collapse that
    occurred in 2007. Many of the credit default swaps, the multi-
    sector credit default swaps that were written by AIG were tied
    to the housing market. When the housing market collapsed, those
    credit default swaps called for the posting of collateral. We
    had to keep ensuring the value of those instruments and we ran
    into a severe liquidity squeeze.
        That's when the Federal Reserve and the U.S. Treasury came
    forward and the first rescue package was essentially a loan of
    up to $85 billion extended to us by the Federal Reserve. While
    that solved one problem, it created another problem because we
    didn't have enough equity to support the $85 billion, so that
    then was subsequently redone to include a balance of equity
    from TARP and debt from the Federal Reserve.
        Mr. Fortenberry. You stated that the default swaps
    performed well; that, however, the reserves underlying the risk
    to manage those default swaps were clearly not there, which
    begs the earlier question about the overall structure under
    which AIG was operating, a thrift holding company and lack of
    regulatory oversight there.
        Mr. Liddy. Yeah. As you know, Congressman, I was not there.
    I had been at the helm for 8 months, and so my time and energy
    is focused on today, tomorrow, and less on yesterday. What I do
    appreciate after being on the job for almost 8 months is I
    don't think the financial products business belonged or
    attached to AIG in any way, shape or form.
        And so when Congressman Kanjorski asked me the question
    about oversight, I think there needs to be substantially
    greater oversight of financial institutions. And maybe we can
    do that with any existing regulators to make sure that those
    that are either very large or pose systemic risk really get
    monitored on a regular basis so you can't have this kind of
    event occur again.
        Mr. Fortenberry. Let's quickly move to an issue of the
    bonuses. We were told earlier it was $120 million. In 2008 new
    information has come out that it is $450 million. Why the
    discrepancy?
        Mr. Liddy. We apologize for any confusion. We are asked so
    many questions on bonuses and each person wants it sliced a
    slightly different way. The first question we were asked was
    corporate bonuses. To us that means bonuses paid at the
    corporate center or paid from the corporation. That was the
    $121 million. We were then asked a separate question, a
    subsequent question. Well, how many bonuses were paid corporate
    wide anywhere in the company, worldwide, in Japan, in South
    America or whatever.
        That's a different question and that's the larger number,
    so we're trying to slice the information in accordance with
    each individual request that we get. We get them from Congress.
    We get them from the Senate. We get them from regulators and
    from the Fed and Treasury. We're being as cooperative as we
    can. Sometimes, we are drowning in requests.
        Mr. Fortenberry. Back to the earlier question about your
    plans for management restructuring. For management
    restructuring we have divided the business into three
    categories. The three largest and most valuable businesses that
    we have we intend to take public or sell a minority stake in.
    That will generate much of the funds we need in order to repay
    the taxpayer. Some of the businesses will be held and we will
    wait for a better day to sell them. Another section of the
    business is maybe a part of AIG going forward. It will take, we
    think, 3 to 4 to 5 years, if the marketplace stays where it is
    today or gets better in order to repay the taxpayer, but we
    have a strategy to do exactly that.
        Chairman Towns. The gentleman's time has expired.
        Mr. Fortenberry. Thank you, Mr. Chairman.
        I yield now 5 minutes to the gentleman from Ohio, Mr.
    Kucinich.
        Mr. Kucinich. Thank you very much, Mr. Chairman.
        Mr. Chairman, I am asking these questions on behalf of my
    constituents in Ohio who are policemen, firemen, teachers and
    other public employees in Ohio, who AIG defrauded, defrauded
    their pension funds. These are people who protect our
    neighborhoods, teach our children, dedicate themselves to
    public service, and AIG cheated them out of $96 million.
        Now, AIG has admitted on multiple occasions to guilty pleas
    and restatements of 24 transactions that the company defrauded
    investors and lied to regulators. My question to Mr. Liddy:
    Does your business plan include settlement of lawsuits against
    AIG for bid rigging, accounting fraud, and market manipulation
    of AIG stock prices?
        We know that you paid an $800 million settlement to the SEC
    and $375 million to the New York Attorney General. And, if it
    does include it, why after receiving $85 billion on September
    16, 2008, and after you assumed the duties of CEO of AIG on
    September 18, 2008, why is it that AIG has cutoff
    communications with representatives of a class action which
    includes police, firefighters, teachers and other public
    employees in Ohio whose pension funds AIG defrauded? And, how
    can you tell this committee that those 8 months which have
    passed, which are contemporaneous with you becoming CEO, that
    you did not direct AIG to basically stall and continue the
    defrauding of these public employees in Ohio? Mr. Liddy.
        Mr. Liddy. Congressman. I'm sorry. I just am not familiar
    with all the particulars of the particular suit that you have
    just referenced.
        Mr. Kucinich. Well, let me help you. On March 26th you sat
    in front of a Financial Services Committee when this issue was
    asked. I want the members of this committee to follow this now.
        You were asked about this before. You told the committee
    you would look into it, do everything you can to make sure it
    gets resolved. Now you said you would do everything on March
    26th. This was after people had already been waiting for months
    to hear whether their pensions were going to be secure. Can you
    name one thing?
        Just name one thing that you've done to get this matter
    resolved with respect to defrauding policemen, firemen,
    teachers and the public employees in the State of Ohio
    defrauding the pension fund. Can you name one thing that you as
    the CEO have done about this?
        Mr. Liddy. Anything involving legal settlements or legal
    challenges I depend on our very substantial legal department to
    resolve. I believe that they have been in either negotiation or
    contacts. I don't know but we will meet with you. I will
    personally meet with you to make sure that we advance the
    situation.
        Mr. Kucinich. Well, that's fine. I want the committee to be
    aware of this. AIG repaid counter parties one to one. Counter
    parties in England, in Germany, in France. Dollar-for-dollar
    you repaid them, but when it comes to police and firefighters
    and teachers in Ohio, zero for the dollars they invested. This
    is during your watch. You can't say this is about some other
    CEO. This is not acceptable, Mr. Liddy. You cannot get $182
    billion, as my friend Mr. Cummings pointed out, and say, well,
    we want to be spared criticism. Yes, this is criticism.
        AIG cheated police, firefighters, teachers, and public
    employees in Ohio out of $96 million. That may not seem like a
    lot of money to a firm that's used to dealing in trillions. But
    you cheated people who save lives, who teach our children, and
    I want to know right now what you're going to do about it. What
    are you going to do about this?
        Mr. Liddy. Well, as I said, we will meet, and I will meet
    with you right after this meeting if you'd like and we can
    begin to understand exactly where we are. I just don't have the
    information on it. All of the things that you've mentioned, I'm
    very sensitive to them. They did all occur before my watch, but
    I am prepared to take responsibility to decide whether they
    should be resolved; and, if so, how.
        Mr. Kucinich. Well, you know, we know the two other parties
    have already been settled in the class action case: Price
    Waterhouse and General Reinsurance Corp. Do you just feel that
    when it comes to public employees you can roll them? You can
    just dismiss them? Is this your attitude? You haven't resolved
    this, Mr. Liddy, on your watch.
        Mr. Liddy. We will work with you and do everything we can
    to get it resolved, sir.
        Mr. Kucinich. Mr. Liddy, I am the chairman of the
    Subcommittee on Domestic Policy; and until this matter is
    resolved, you are going to keep getting called in front of
    Congress to explain why it's OK for AIG to cheat police,
    firemen, teachers and public employees. We're not going to let
    you go, Mr. Liddy, and I will talk to you after the meeting,
    but you are not going to roll this Member, guaranteed.
        Mr. Liddy. Yes. We'll get together after the meeting. We
    will do everything we can to make sure we resolve it.
        Mr. Kucinich. You said that on March 26th. I have your
    quote.
        [Audience member sneezes.]
        Mr. Kucinich. God bless you. Mr. Liddy, thanks for being
    here, but there is a moment here of truth and you are going to
    have to remember these police, firefighters, and teachers. Mr.
    Chairman, I came to this Congress not to represent these people
    on Wall Street who have been shafting the American people. I
    came here to represent my constituents and that is who I am
    speaking on behalf of right now. Not going to let you go. Not
    going to let you get away with it.
        Thank you.
        Chairman Towns. Thank you, and the gentleman's time is
    expired.
        The gentleman from North Carolina, Mr. McHenry, 5 minutes.
        Mr. McHenry. Thank you, Mr. Chairman.
        Mr. Liddy, thank you from coming back before Congress and I
    know this is not one of the more joyful days of your life. When
    did you receive the honor of being CEO of AIG?
        Mr. Liddy. When did I?
        Mr. McHenry. Yes.
        Mr. Liddy. Middle of September; September 18th, I think was
    the date.
        Mr. McHenry. September 18th, OK. And in the whole run-up
    there's a Washington Post story today, which I am sure you
    caught this morning about AIG entitled, ``Officials knew of AIG
    bonuses a month before fire storm.'' Now, I just want to touch
    on this.
        You have received enough in the way of questions on this
    and I think you have answered everything to the fullest extent
    you could, but documents show that senior officials of the
    Federal Reserve Bank of New York received details about the
    bonuses more than 5 months before the fire storm erupted and
    were deeply engaged with AIG as well as outside lawyers,
    auditors, and public relations firms about the potential
    controversy.
        But, the New York Fed did not raise an alarm with the Obama
    administration until the end of February. So, interestingly
    enough, the New York Fed was very engaged and well-informed on
    this matter long before it came to public light. Is that true?
        Mr. Liddy. Yes, the AIG FP bonuses were a topic of great
    consideration starting in about the end of October, beginning
    of November.
        Mr. McHenry. Was the chairman of the Federal Reserve and
    the Bank of New York informed of these bonuses?
        Mr. Liddy. I can't answer that.
        Mr. McHenry. Did you have a conversation with the chairman
    of the Federal Reserve or the Bank of New York?
        Mr. Liddy. No. I did not. I don't think so.
        Mr. McHenry. In the fall you never had a discussion?
        Mr. Liddy. The conversations as I remember them would have
    been more with the people that we interface with at the Federal
    Reserve on a regular basis; but there would not, if you mean by
    chairman, you mean Chairman Bernanke, no. There would have been
    no conversation with him and I don't think there was any.
        Mr. McHenry. What about the head of the New York Fed?
        Mr. Liddy. Yeah, I just don't recall who the conversations
    were with.
        Mr. McHenry. Did you have any conversations in the fall
    with Timothy Geithner?
        Mr. Liddy. Not in the fall. I don't believe so. No.
        Mr. McHenry. OK, so you had no conversations.
        Mr. Liddy. Mr. Geithner had pretty much recused himself
    from many of these activities because either they were
    considering him for the spot of the Treasury Secretary or he
    had already been nominated.
        Mr. McHenry. Well, when some of these actions took place,
    there wasn't even a President-elect at the time. So you didn't
    have any conversations with Timothy Geithner during September
    or October of last year?
        Mr. Liddy. Not on this topic. I don't remember that, but
    I'd have to go back and check. I don't think so. No.
        Mr. McHenry. OK. If you could submit that to the committee
    I'd certainly appreciate it. So you are saying you didn't have
    any? Apparently, you are saying you didn't have any
    conversations with him whatsoever?
        Mr. Liddy. Oh, on bonuses you mean, or in general?
        Mr. McHenry. If you listen to me specifically, did you have
    any conversations with a Mr. Timothy Geithner in September,
    October, November or December of last year?
        Mr. Liddy. Yes, I would say in October or November
    preceding the revision of the original bail-out program, I
    would have met with Mr. Geithner.
        Mr. McHenry. Did you have any mention of the word bonus
    with Mr. Geithner?
        Mr. Liddy. No. Not in those meetings. No.
        Mr. McHenry. Did you have any discussion with Mr. Geithner
    in September, October, November or December in any way, shape,
    or form regarding anything to do with the word bonus or what a
    bonus means?
        Mr. Liddy. No. I don't believe so.
        Mr. McHenry. OK. Thank you. I'm not an attorney, but it
    seems a little slippery the way you are trying to answer this
    so I want to make sure we have that on the record.
        Recent data about commercial real estate predictions for
    this coming year and the following year, this is the substance
    of what I'd like to talk about. And I am sorry we had to
    belabor that and it was painful for me as well to try to ask
    that question and get a direct answer from you. But increasing
    vacancies, we have a discussion about the real estate industry,
    and specifically with the commercial real estate industry this
    year and next regarding increasing vacancies, and perhaps loan
    defaults, as liquidity for refinancing remains very scarce.
        We see a lot of troubles in the CNBS market, obviously, so
    we talk about AIG's commercial real estate portfolio and loan
    exposure, and how you think this portfolio will hold up if it
    were subjected to a stress test style of assessment that the 19
    largest banks went through, if you could touch on commercial
    real estate in your loan portfolio and your exposure there.
        Mr. Liddy. We have a substantial commercial real estate
    portfolio either in owned real estate or CNBS's as you refer to
    them. Those things lost substantial value in the fourth quarter
    and our write-down of those in fact was what contributed to our
    very large loss in the fourth quarter.
        You know, I am worried about that portfolio. I am worried
    about real estate in general. If there is a lack of economic
    activity, I think it does not go well for commercial real
    estate at all. If the stimulus money that's being brought to
    bear on our economic travails does in fact work, then I think
    we could work our way out of that.
        I do not have a sense of what that timing would be, but I
    think commercial mortgages and CNBS's in general, which a lot
    of insurers invest in, because they are long-dated assets that
    match long-dated liabilities. I think that those asset classes
    could be under some stress for a while.
        Chairman Towns. The gentleman's time has expired.
        I yield 5 minutes to the gentleman from Massachusetts,
    Congressman Tierney.
        Mr. Tierney. Thank you, Mr. Chairman. Thank you, Mr. Liddy,
    for being here with us today.
        Let me ask you. About November 2008, the Federal Reserve
    Bank of New York established Maiden Lane 3, a financing agency.
    And correct me if I'm wrong. Was that the agency that provided
    the money for AIG to then go out and purchase some of the
    underlying subprime securities, about $27 billion?
        Mr. Liddy. Yes.
        Mr. Tierney. Now, you did that and you canceled the
    contracts that you had with those counterparties. Am I right?
        Mr. Liddy. Yes.
        Mr. Tierney. OK. Would you provide copies of those
    contracts to this committee?
        Mr. Liddy. The Federal Reserve would have to do that,
    because the Federal Reserve did that. So let me just explain.
    While we were the counterparty, we would fight tooth and nail
    with them. Once the Federal Reserve decided that we would put
    money into a financing entity, a special purpose vehicle, then
    the Federal Reserve took over the responsibility for the
    negotiation of those settlements and the cancellation of the
    contracts. They would have to provide those. So they took them
    all.
        Mr. Tierney. All right, thank you. The special purpose
    entity, will you explain to me how that was structured?
        Mr. Liddy. AIG put in the equity. AIG sold the underlying
    assets at some cents on the dollar. I don't remember the exact
    number, 45 or 50.
        Mr. Tierney. To raise the equity?
        Mr. Liddy. No. The equity came from money that the U.S.
    Treasury had provided us, but then we sold the assets and the
    sale of those assets went into Maiden Lane 3.
        Mr. Tierney. So, I'm just trying to learn here. So the sale
    of the assets were the subprime instruments?
        Mr. Liddy. It was the underlying assets that were valued
    at, as I said, 45 or 50 cents on the dollar. The Federal
    Reserve then bought them and that money went into the funding
    of Maiden Lane 3.
        Mr. Tierney. The reports are that you paid full value for
    the subprime securities. Is that accurate?
        Mr. Liddy. Again, the Federal Reserve did that.
        Mr. Tierney. They paid full value for that?
        Mr. Liddy. Yeah, the Federal Reserve did that. In fact, we
    don't even know what they did because we were out of that
    process.
        Mr. Tierney. Before that all happened, AIG had been having
    serious collateral disputes with Goldman Sachs over certain
    values involved in their portfolios. Correct?
        Mr. Liddy. Oh, it was any counterparty, not just Goldman
    Sachs. It was any counterparty. It gets to the root of mark to
    market. You and I can look at the same set of facts and you can
    take it as one value. I can take it as another.
        Mr. Tierney. And, I guess, Mr. Chairman, we would need to
    go and get those contracts from the Fed.
        The question here, Mr. Liddy, obviously is why we paid full
    value when there was legitimate disputes as to the value and
    that's why we didn't negotiate a better arrangement on that.
    And you're telling us that it's the Fed we should speak to and
    not you, because you weren't involved in that.
        Mr. Liddy. Yes, we were asked to step aside once those
    financing vehicles were set up; and, I believe the Federal
    Reserve had the responsibility for those.
        Mr. Tierney. OK. Now, Mr. Kanjorski asked you a question
    about regulation going forward and you answered on that. Why
    wouldn't we favor some sort of a regulatory system that
    disallowed entities like this from getting too large and too
    diverse as opposed to just having somebody oversee them and
    sort of watch over them?
        Why wouldn't we go back to something in the nature of Glass
    Steagall and that type of operation where we just simply say
    you can't get that diverse and that large. Do you want to
    comment on that?
        Mr. Liddy. You know, I would. I'm not so sure it's the
    issue of large. It's a matter of breadth. So if you are in one
    product line and you are really muscular in it, and you are
    very good at it and you know it, that's one thing. But if you
    are in 20 different product lines, and that's the definition of
    large, that seems to me to have a different level of risk. So I
    think it's probably the center point for a debate that ought to
    occur. I just don't think a situation where an AIG of really a
    primary insurance company should have a Financial Products
    business attached to it.
        Mr. Tierney. Thank you for that. You had another $43.7
    billion between September 2008 and December 2008 that was from
    the public that used to satisfy financial counterparties with
    respect to the securities lending operations of AIG. Were there
    any negotiations involved in those payments, or were they
    contractually obligated for the amount that you paid?
        Mr. Liddy. No. That's a whole different situation. It's
    where we have to pay a dollar back to somebody who's got our
    assets. If we want our assets back, we have to give them a
    dollar. But the investments we had invested are a dollar and
    had declined, so it's a much different situation than a credit
    default swap.
        Mr. Tierney. All right. Would you be able to make those
    contracts available?
        Mr. Liddy. I assume I will ask our general counsel and I'm
    always worried about who's on the other end and did we sign a
    confidentiality agreement that we won't make anything available
    if you will give us the time to research whether we can do
    that. We will come right back to you.
        Mr. Tierney. Thank you. I yield back, Mr. Chairman.
        Chairman Towns. Thank you very much. The gentleman yields.
        The gentleman from Arizona, Congressman Flake.
        Mr. Flake. Thank you, Mr. Chairman.
        Mr. Liddy, can you tell us what the administration's plans
    are moving forward with AIG?
        Mr. Liddy. I cannot. I don't have any idea. I think I know
    what my marching orders are and that is to run the company as
    well as we can and in a way that is responsible. It gives us a
    chance to pay back the American taxpayer, preserves the jobs,
    and that's what we are trying to do.
        Mr. Flake. Well, great. I didn't think you could answer
    that question. I just asked that to point out that the minority
    has asked for an administration witness for quite a while. It
    would be helpful to know what the administration has planned,
    but we are unable to ascertain that and I appreciate that's not
    your job to answer that question. It was just difficult from
    our side.
        We don't know what the administration has planned and I
    hope that we have some hearings coming up where we can find
    that out. I would ask, though. There has been some talk that
    AIG, in its effort to come back, is undercutting competition
    offering insurance products under value and making it difficult
    for competition. Who are your main competitors?
        Mr. Liddy. Domestically, Ace, Zurich, OCSA, Alliance,
    Travelers; I would also say that a number of organizations have
    looked at that issue. The GAO looked at it and they commented
    on it the last time I was here before Congress. The Federal
    Reserve has commissioned its own study of that, and we just
    don't do that. We don't put the Federal money into the property
    casualty businesses and then use that as a competitive
    advantage. And I think any analysis that's been done would
    support that. Brokers have done that same kind of analysis, and
    there doesn't appear to be much validity to it.
        Mr. Flake. So any allegation that is taking place has no
    basis in reality?
        Mr. Liddy. I don't believe so. You know, it's a very
    competitive marketplace, and like most areas of business people
    fight tooth and nail, but in terms of us appropriately or
    inappropriately pricing our product, we do not do that. What I
    don't want to do is have this company get out of the mess that
    it's in, and then find out that the book of business that we
    have is underpriced and we've got insurance issues. We are just
    not going to do that.
        Mr. Flake. Right. Well, you can see why some might be
    concerned about that whenever government is backing someone.
    We've seen it with the GSEs. There's simply less care taken.
        Mr. Liddy. Yes. No, I understand it 100 percent. Again, I'd
    say if you look at the early results of the GAO study or some
    work done by the Federal Reserve or work done by Brokers, I
    think you'll find little, if any, validity to that issue.
        Mr. Flake. OK. Thank you, Mr. Chairman.
        Chairman Towns. Thank you very much.
        The gentleman from Missouri, Mr. Clay.
        Mr. Clay. Thank you, Mr. Chairman.
        Chairman Towns. Five minutes.
        Mr. Clay. Thank you.
        Mr. Liddy, welcome back. AIG continues to pose significant
    losses, despite infusions of taxpayer dollars amounting to over
    $180 billion. Just last month AIG experienced a shocking $61.7
    billion loss, a quarterly loss, which was the highest in U.S.
    corporate history. Is AIG really too big to fail and hasn't it
    already failed?
        Mr. Liddy. Well, as I explained earlier, there were reasons
    for that loss. It had to do with market valuations and then
    writing off assets on our balance sheet which we thought did
    not have as much value as we were carrying them on.
        I would point out to you that just last week we reported
    our results for the first quarter and that loss was not $62
    billion. It was $4.3 billion, which was substantially less than
    the loss was in the first quarter of 2008. So we believe we are
    making some progress. I don't think that AIG has failed. I
    think, as I've attempted to say in my oral remarks and in
    response to several questions, it's a very complicated
    institution. It's a very complicated situation.
        We have a good plan to work our way out of this and
    hopefully to repay the American taxpayer, but it is heavily
    dependent upon economic recovery and the capital markets
    staying where they are or improving.
        Mr. Clay. Now given these jaw-dropping figures, I am
    concerned that any taxpayer investment in AIG can be equated to
    throwing money into a bottomless pit. It appeared that
    taxpayers are simply propping AIG up. Is AIG in effect a
    sinkhole?
        Mr. Liddy. No. As I said, I don't believe so. I think we
    have a good plan that we will be able to pay the American
    taxpayer. Some very vital businesses will emerge from AIG, will
    be a much smaller, more transparent, more nimble company, so I
    would not categorize it as a sinkhole.
        Mr. Clay. Let me ask you about the AIG Financial Products
    Division. Did AIG retain any of the executives in its Financial
    Products Division that ran AIG into the ground?
        Mr. Liddy. The short answer is no. The top three, four or
    five people are folks that I would say I characterize as the
    architects and builders of the multi-sector, credit default
    swap, those people are gone. Do we have people who do credit
    analysis or trade on securities, yes; but, they weren't the
    architects and builders and engineers of that program.
        Mr. Clay. So you are not working with a completely new team
    at the Financial Products Division?
        Mr. Liddy. We are working with a completely new leadership
    team. Many of the folks who are executing on those contracts
    are the same, but they are executing under different standards,
    and different leadership, and different requirements.
        Mr. Clay. You know, all of the losses that we have talked
    about today have occurred under your watch as CEO. So tell the
    committee what exactly you are doing today that is so different
    from what you have done in the past few months so you will
    better protect taxpayers' investment in AIG and ensure a return
    on their investment.
        Mr. Liddy. Well, we are trying very hard, and I think
    making good progress to wind down the AIG financial progress,
    which posed the systemic risk that we represented to the U.S.
    financial system. And we've made good progress on it. If asset
    values continue to go down, we could continue to record losses.
    Hopefully, that does not occur.
        Mr. Clay. Thank you for your answers.
        Mr. Chairman, I yield back.
        Chairman Towns. Thank you very much.
        As you know, we have votes on the floor and what I would
    like to do is recess until 12:15 and return. And of course that
    would give us enough time to have the three votes plus get a
    drink of water. So we will recess until 12:15.
        [Recess.]
        Chairman Towns. I recognize the gentleman from
    Massachusetts for 5 minutes.
        Mr. Lynch. Thank you, Mr. Chairman.
        I also thank the ranking member in his absence for holding
    this hearing, and I want to thank Mr. Liddy for appearing
    before this committee again to help us with our work.
        Mr. Liddy, the title of today's hearing is ``AIG: Where Is
    the Taxpayer Money Going?'' And, in addition to that, in the
    letter of invitation that was sent to you and discussed with
    your counsel, in part, we asked you to respond to the question
    where is the Federal financial assistance going. Where is the
    taxpayer money going?
        Regrettably, in your written testimony, we gave you ample
    opportunity to provide a written response of reasonable length
    to that question, where is the Federal money, where is the
    taxpayer money going. You did not respond to that in any
    significant fashion. There's not a sentence in there that
    addresses the central questions of where is the taxpayer money
    going. And, look. I am trying to work with you.
        I understand that you came out of retirement to do this. I
    understand you are working for a dollar a year. I understand
    all that, but we are not getting the responses that we expect.
    I don't think there's a majority shareholder in this country--
    only 80 percent of any company--that is being treated like the
    American taxpayer is in this case. It's a plain fact that AIG
    would have gone bankrupt but for the goodness of the American
    people to step forward and rescue this company. That should
    have been a game changer on your side. That should have
    signaled a shift that this company is now 80 percent or 79.9
    percent owned by the taxpayer, and it is a new ball game, one
    of transparency and accountability to the American taxpayer.
        I have not seen that happen. I did not see that happen in
    the bonus controversy, which continues, because the numbers are
    different now than the last time you were here. And this lack
    of information that will get back to you--I'll have somebody
    dig up those documents for you--and a complete absence of any
    response to the central question of where the taxpayer money is
    in your opening statement or in the written testimony that we
    asked you to provide.
        I am disappointed at that. I would love to work with you.
    You know, I am not here to be contentious, but I am here to do
    my job on behalf of the American taxpayer. And I associate
    myself strongly with the words of Mr. Kucinich earlier today. I
    feel like you're trying to roll us and you're trying to
    obfuscate things and obstruct us from doing the job that we
    need to do.
        You did mention in your statement the fact that AIG has
    reduced their nominal exposure from $2.7 trillion to $1.5
    trillion. So let me ask you about that, since you haven't
    responded to the central question of the hearing. Let me ask
    you about that and reduce the nominal issues and the notional
    exposure from $2.7 trillion to $1.5 trillion. But, how much of
    that reduction have you accomplished by shifting the exposure
    to the American people, either through the Fed to Treasury,
    through Maiden Lane, or through any of these TALF or any of
    these other federally or taxpayer-backed entities?
        Mr. Liddy. Little if any of that reduction to notional
    exposure would have anything to do with the number of items
    that you just mentioned. That notional exposure had been
    reduced by settling those trades, selling the books of
    business, and just overall downsizing of the business known as
    AIG FP.
        Mr. Lynch. Well, let me ask you. I know the Treasury
    approved up to $52.5 billion in loans in order to purchase
    troubled assets that were formerly owned by AIG, now owned by
    the U.S. Government. Wouldn't that result in a shift from AIG
    to the Government?
        Mr. Liddy. Yes, that would have. And, I'm sorry. I was
    trying to draw a reference to the last time we had a
    conversation about this what has changed. So Maiden Lane was
    put in place in November 2008 and you are absolutely correct.
    Some of those assets would have been transferred into the
    Federal Reserve after they did a very thorough valuation
    analysis of what their potential would be. Since then, any
    reduction in the notional value has not been as the result of a
    transfer.
        Mr. Lynch. OK. There's also up to $34.5 billion in Fed
    loans retired by securities and equity interest provided to the
    government by AIG. That's on top of the $52.5 billion that I
    first mentioned.
        Mr. Liddy. Those were all items that were a part of Maiden
    Lane, either 2 or 3, and go back to November. Since then we
    haven't transferred any additional risk to the American public.
        Mr. Lynch. So you are basically saying this is right then.
    The $87 billion here went from AIG to the U.S. Government here.
        Mr. Liddy. Well, assets. Assets with real values got
    transferred to the Federal Reserve, and they got transferred
    at--I don't remember the exact number--45.
        Mr. Lynch. Are these?
        Mr. Liddy. No. The assets got transferred to the Federal
    Reserve at cents on the dollar. Let's say 50 cents on the
    dollar, so the Federal Reserve has the opportunity and the
    American public has the opportunity to benefit from any
    appreciation or recovery in those asset values. That's what
    Maiden Lane 2 and 3 are all about.
        Mr. Lynch. I don't have enough time. I wish you had in your
    testimony outlined where the taxpayers' money has gone.
        Mr. Liddy. Congressman, can I address that? The last time I
    was here, we provided a very exhaustive document that showed
    exactly where all of the taxpayer money has gone. So of the $82
    billion, $40 billion of TARP and roughly $42 or $43 billion of
    a loan from the Federal Reserve, it's a very exhaustive
    analysis.
        It breaks it down into how much went to the counterparties,
    how much went to municipalities to protect the guaranteed
    investment contracts, how much to pay off debt that was called
    because we'd lost our ratings. How much went to securities
    lending? There's a very exhaustive analysis that's a part of
    the record that explains that in some detail. We aren't trying
    to obfuscate anything. We thought we had already provided that.
    And, if you like, we will provide you another copy, but I think
    it will answer all your questions.
        Mr. Lynch. Well, I think when we titled this hearing
    ``Where did the money go,'' and we send you an invitation, and
    we say, ``tell us what you did with the Federal financial
    assistance,'' I think that sort of is asking that. And so now
    we have this hearing and we have you up here and we don't have
    any response, and that bothers me to no end. You know?
        We are going to have to have you back up here. You know,
    I'm with Kucinich on this. We're not going to be rolled on this
    and when we ask you a question and we get all these people
    together and we have a hearing, and we ask you a specific
    question to address on your testimony, by God we want the
    answer.
        We own 80 percent of your company. You exist because the
    American taxpayer purchased, you know, 79.9 percent of your
    shares. And so there's an obligation due here. There's a
    transparency that's owed to the American taxpayer and we don't
    see it, and it is particularly frustrating. Let me ask you.
        I did see some of the counterparty obligations here that
    when the first money went into AIG, one of the top
    beneficiaries was Goldman Sachs at $12.4 billion. Now the
    person who arranged that deal was Secretary Paulson, formerly
    of, associated with that firm. Did you feel any pressure or
    anything in terms of the order in which you had to compensate
    or provide those funds to those individual firms? Did you feel
    any conflict there?
        Mr. Liddy. I did not. And the final resolution, the final
    determination of who got what, was made by the Federal Reserve,
    not by people at AIG.
        Mr. Lynch. OK. Well, that explains a lot. OK. But again I'm
    going to ask that the committee reinvite you to another hearing
    at which you actually can get into that central question of
    where that taxpayer money went. Maybe we could do that in
    conjunction with Mr. Kucinich and the questions he had. But at
    this point, I will yield back.
        Thank you, Mr. Chairman.
        Mr. Liddy. And Congressman, I will provide to you within
    the next couple days a fresh copy of what we provided the
    previous committee that I was at, which goes into great detail
    as to where the money went.
        Chairman Towns. Thank you very much.
        Congressman Connolly from Virginia.
        Mr. Connolly. Thank you. Thank you, Mr. Chairman; Mr.
    Liddy.
        Welcome, Mr. Liddy. A couple of questions. Your
    predecessor, Mr. Greenberg, testified before this committee a
    few weeks ago, and he indicated that he would now favor Federal
    regulation of credit defaults, swap instruments and
    derivatives, for that matter.
        Do you share that opinion that the Federal Government needs
    to regulate those financial instruments?
        Mr. Liddy. Yeah. I think they need to be put on an
    exchange. I think they need to be standardized, and there needs
    to be a lot more transparency. And if there was Federal
    regulation, you would get all of those.
        Mr. Connolly. And if I understood your testimony this
    morning, Mr. Liddy, you believe that in retrospect, where AIG
    went wrong was frankly branching out into such financial
    instruments in the form of AIG FP, specifically.
        Mr. Liddy. Yes. Those instruments are more appropriate for
    large commercial banks and investment banks that have the skill
    sets, a more refined skill set to handle them. It's not
    appropriate for an insurance company, in my judgment.
        Mr. Connolly. Right.
        Could you just review for me the figures I thought I heard
    you give in your testimony this morning. How much did AIG get
    pumped into the company directly from appropriated dollars from
    this body? And how much came directly from the Federal Reserve?
        Mr. Liddy. As we stand right now, the money that's been
    advanced to the company is $40 billion out of TARP, out of the
    Treasury program, and about $43 billion in loans from the
    Federal Reserve.
        Mr. Connolly. Got you.
        Mr. Liddy. Now, in addition to that--let me just finish--in
    addition to that, there's another $30 billion of TARP that we
    can draw on if we need it; and there's an additional $17
    billion to top the $43 billion off to $60 billion, that we
    could drawn from as a loan from the Federal Reserve.
        Mr. Connolly. OK. Thank you.
        Now, with respect to governance, if I understand it
    correctly, there are three federally appointed trustees?
        Mr. Liddy. Yes.
        Mr. Connolly. All of them are appointed by the Federal
    Reserve, is that correct?
        Mr. Liddy. You should ask them. They represent Treasury as
    the owner of the $79.9. I think they were appointed by the
    Federal Reserve, because the Federal Reserve delegated that
    responsible by Treasury.
        But I'm not involved in that process.
        Mr. Connolly. Right. But with respect to thetrustees, I
    mean, their names are Jill Considine, Chester Feldberg, and
    Douglas Foshee. That ring a bell?
        Mr. Liddy. Yes. Yes.
        Mr. Connolly. Those are all Federal Reserve appointees, are
    they not?
        Mr. Liddy. Yes. But I'm sorry, where I'm stumbling, because
    I'm just not involved in it, as I think they represent the
    Treasury's interest, the ownership interest----
        Mr. Connolly. You say you're not involved----
        Mr. Liddy. In the selection and role of the trustees.
        Mr. Connolly. In the selection. But you certainly are
    involved in interaction with----
        Mr. Liddy. Oh, absolutely, yes.
        Mr. Connolly. Are there any other Federal trustees?
        Mr. Liddy. No.
        Mr. Connolly. So, for example, there are no elected
    officials or anyone appointed by this elected body as a trustee
    of AIG?
        Mr. Liddy. No. Certainly not that I'm aware of.
        Mr. Connolly. Hmm.
        They don't attend board meetings, is that correct?
        Mr. Liddy. They do not. The Federal Reserve has delegates
    at every building meeting and every committee meeting.
        Mr. Connolly. And is the board still pretty much a private
    sector-like board?
        Mr. Liddy. Private sector?
        Mr. Connolly. Well, what I'm asking is, is there a clear
    delineation between the public trustees representing Federal
    interests of almost 80 percent and the board of directors that
    apparently, I'm asking, stays pretty much privately controlled
    and appointed?
        Mr. Liddy. There is a delineation, but again the linchpin
    of that would be the representatives from the Federal Reserve,
    who are observers and overseers at every board meeting, every
    committee meeting, every strategy meeting, every discussion
    that we have.
        Mr. Connolly. So representatives of the Federal Reserve sit
    in on board meetings?
        Mr. Liddy. Yes, they do.
        Mr. Connolly. Got you. Unlike these trustees?
        Mr. Liddy. Correct.
        Mr. Connolly. Going back to the governance question, what
    is the distinction, then, between the role of these trustees
    and those members of the Federal Reserve who sit on board
    meetings, overseeing that procedure?
        Mr. Liddy. I'm going to answer, and then I think you should
    address that to the trustees.
        The trustees are the protectors of the 79.9 percent
    ownership and the value that we'd like to create for that. The
    Federal Reserve is representing its interests as a lender, and
    has in the past been asked by the Treasury to also kind of
    coordinate Treasury's interaction with the company, so that
    there can be only one organization doing it instead of
    splitting it.
        We have 360-degree oversight with an awful lot of people
    wanting to understand what our strategy is, and what our
    execution is. The Fed has been asked to try to coordinate that
    360-degree oversight.
        Mr. Connolly. My time is probably running out. But let me
    ask a final question. With respect to bonuses, one of the
    rationales, in the public record anyhow, for bonuses, was
    recruitment and retention. How many folks--with respect to the
    bonuses in question--how many folks left the company, who
    received bonuses?
        Mr. Liddy. Yeah. I would say very few.
        Mr. Connolly. Now are you talking about--and here's where
    it's very easy to get off the track--you're talking FP
    retention bonuses, or overall company bonuses? Or what----
        Mr. Liddy. Well, I'll gladly go with the FP bonuses for a
    minute. On the FP sector, we had about maybe 10 to 12 to 15
    resignations. We've had several of those people rescind those
    resignations and stay with us, even as they worked to return
    their bonuses.
        I don't know if the resignations are over yet. Some have
    said, you know, ``I'm going to help you wind this down and be
    as professional as I can, but then I want to get on with my
    life, and I want to resign.''
        So I don't know that my answer is reflective of what will
    eventually happen.
        Mr. Connolly. If it's possible to get us data for the
    record in terms of that list of people who qualified for
    bonuses and/or got bonuses, and how many of them left the
    company or stayed with the company?
        Mr. Liddy. OK.
        Mr. Connolly. I would appreciate that.
        Mr. Liddy. Thank you.
        Mr. Connolly. Thank you, Mr. Chairman. I yield back.
        Chairman Towns. Thank you.
        I yield 5 minutes to Mr. Westmoreland, gentleman from
    Georgia.
        Mr. Westmoreland. Thank you, Mr. Chairman.
        Mr. Liddy, how many lawsuits are currently pending between
    AIG and CV Star, Star International, and/or Mr. Hank Greenberg?
        Mr. Liddy. I can't give you an exact number, but several,
    and there are several that are quite large. I try to keep a
    finger on the pulse of the largest ones, but then I rely upon
    our general counsel and our legal department to handle those
    issues.
        Mr. Westmoreland. How much money has AIG spent on these
    lawsuits and legal fees so far? And how long do you think this
    could go on? And how much money has AIG set aside or projected
    for the future cost of these lawsuits?
        Mr. Liddy. I don't have the details, sir. We can provide
    them to you. But I would say the largest one and largest
    lawsuits we have involves a lawsuit with Seco, and it has a $4
    billion potential recovery attached to it.
        And so working to get that money so that it can be used for
    the benefit of the taxpayers, we think makes some sense.
        Mr. Westmoreland. OK. But you know, from what I've been
    reading or told is that this could take 3 or 4 years and tens
    of millions of dollars to get these lawsuits settled, with CV
    Star or Mr. Greenberg or Star International.
        Mr. Liddy. Well, the first of those lawsuits is scheduled
    to go to trial on June 15th of this year.
        Mr. Westmoreland. OK.
        Mr. Liddy. And the start of that lawsuit would go back to,
    oh, 2005, 2006. So an awful lot of work has already been done
    with respect to it. So the issue becomes: Do you continue to
    pursue it, because you're not very close to what you think will
    be a legal victory involving a fair amount of money.
        Mr. Westmoreland. But that's one of the lawsuits. You said
    you didn't know exactly how many are pending.
        Mr. Liddy. No. I know that one, because it's one of the
    larger. Then there's a suit against Mr. Greenberg to the tune
    of about $1.6 billion to recover the fines and penalties that
    the company paid as a result of his behavior, that was
    determined. That's what we had to do in order to pay the
    attorney general of the State of New York.
        Mr. Westmoreland. OK. But you will get us the information
    about how many lawsuits are pending?
        Mr. Liddy. Yes.
        Mr. Westmoreland. And where they're at in the legal
    process, if you don't mind?
        Mr. Liddy. With respect to Mr. Greenberg?
        Mr. Westmoreland. Yes. That would be fine.
        According to the news reports--and I want to ask you if
    this is true--that Mr. Greenberg has offered to submit all
    these matters to a mandatory arbitration. Are those news
    accounts true?
        Mr. Liddy. We've gone through various forms of either
    mediation or arbitration in the past, generally without any
    successful conclusion. And now that all the work has been done
    and this trial is ready to start, and the judge who is going to
    hear it has been briefed and is knowledgeable on it, most of
    those activities are no longer ongoing, but we certainly have
    engaged in those discussions before.
        Mr. Westmoreland. But I think my question is: Are the news
    reports true that it would be mandatory arbitration? Binding
    arbitration? Binding arbitration?
        Mr. Liddy. Yeah. I don't think so. No. Again, we're going
    to quickly exhaust my level of expertise in terms of exactly
    what that would be. And that's what I----
        Mr. Westmoreland. Well, could you get that information too?
    To find out if these news reports are true that it would be a
    binding arbitration that he has suggested that he and AIG go
    through?
        Mr. Liddy. Yes.
        Mr. Westmoreland. Because, you know, to be honest with you,
    Mr. Liddy, now that AIG is about 80 percent taxpayer owned, I
    would think that if this binding arbitration was an offer that
    was out there for both sides to do, that it might be in the
    best interests of the American taxpayer to get these things
    settled, rather than going on for years and years and years,
    paying these legal fees.
        And I'm sure that binding arbitration with whoever the
    arbiter would be could, in fact, in the end result, bring this
    to a close and save the taxpayers, myself, and my kids and
    grand kids millions of dollars over this period of time.
        You mentioned yourself that this had been going on since
    2005 in this one case. And so if there's more than one case,
    how much longer could it go on? How much more money are we
    going to spend on lawyers? And what would be the harm in going
    to a binding arbitration?
        Mr. Liddy. Well, as I said, we have attempted to do that on
    numerous occasions with Mr. Greenberg on at least one suit, and
    probably others.
        And now all of the work and effort has been teed up to
    actually take this to trial. So we think we have an excellent
    chance to----
        Mr. Westmoreland. So you've never been to binding
    arbitration is what you're saying?
        Mr. Liddy. I'll provide you the detail. I just don't know.
        Mr. Westmoreland. OK. Because I mean, if you've been to
    binding arbitration, it looks like it will be binding. I don't
    want to badger you, and I'm not trying to----
        Mr. Liddy. No--I've been through several rounds of
    mediation----
        Mr. Westmoreland. Well, I would like to know the details on
    that, because I feel like since, you know, we now own 80
    percent of the company, that we do have an interest in that,
    and an ongoing litigation that could cost millions of dollars--
    --
        Mr. Issa. Would the gentleman yield?
        Mr. Westmoreland. I will.
        Mr. Issa. Thank you.
        Mr. Liddy, earlier I asked you about the current stock
    value, you know, of your stock. But I didn't ask you about your
    portfolio in its entirety. As an enterprise value, what would
    you say the fairly stated enterprise value of the going concern
    you run today is? Not what could liquidate it for, but what the
    enterprise value is? So that we could decide what you believe
    it is worth in a fair market. Not what it's going to earn over
    years in which you get artificially low loans and stock, which
    is paying no dividend; but what do you believe the enterprise
    is worth today?
        Mr. Liddy. I would go back to the discussion we had
    earlier. I think it's the equity value. It's about 2.7 billion
    shares, I think, at approximately $2 a share. Because it's not
    just the assets that you have to value. It's all the
    liabilities.
        It's the $40 billion that we want to pay----
        Mr. Issa. Well, that's why I asked for the enterprise
    value----
        Mr. Liddy. There's $250 billion of other debt that we owe.
    So I think the enterprise value is at most what the equity
    value is worth today.
        Mr. Issa. So you're saying you're worth $5 billion, and
    you've got $190 billion of the stockholders' investment?
        Mr. Liddy. Well, again, the key is to be able to manage
    this situation over time, so that we can liquidate the
    liabilities, pay back everything, and then have a value
    retained, which the trustees are the guardians of.
        Chairman Towns. Thank you, gentlemen. The time is expired.
        Mr. Issa. Mr. Chairman--and I'll yield back my time--but I
    would like to make a request that we do get this information
    from Mr. Liddy and AIG as far as the future liability that
    could be imposed upon the taxpayers.
        Chairman Towns. Without objection, and we will hold the
    record open for the information.
        The Gentlewoman from Ohio, Ms. Kaptur.
        [The information referred to follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Ms. Kaptur. I thank you, Mr. Chairman, and welcome, Mr.
    Liddy.
        Mr. Chairman, I would like to place in the record, as I
    begin my questioning here, the list of the current board of
    directors of the Federal Reserve Bank of New York as well as
    the list of primary dealers with the Federal Reserve Bank of
    New York, and the amount of funds that have been provided to
    the different institutions that are primary dealers, as being
    counterparties to some of the funds that were received through
    AIG.
        Chairman Towns. Without objection.
        Ms. Kaptur. I thank you.
        Mr. Liddy, may I ask you, what is the actual address at
    which AIG is headquartered?
        Mr. Liddy. 70 Pine Street.
        Ms. Kaptur. 70 what?
        Mr. Liddy. Pine, P-i-n-e, in New York.
        Ms. Kaptur. P-i-n-e. Is that in New York City?
        Mr. Liddy. Yes, it is.
        Ms. Kaptur. OK. Where in New York City is it? Is it part of
    the Wall Street Community?
        Mr. Liddy. Yes. It's lower Manhattan.
        Ms. Kaptur. It's lower Manhattan. Who would be your closest
    financial neighbors there?
        Mr. Liddy. The Federal Reserve is two blocks away.
        Ms. Kaptur. All right. Thank you.
        The American people have now given AIG nearly $200 billion,
    and I guess others have stated we own about 79.9 percent of
    AIG. Have you paid the taxpayers back any of the money that
    they have lent you to date?
        Mr. Liddy. We have. We're required--whenever we sell an
    asset, we're required to take the proceeds of that asset, to
    the extent we can get out of the insurance companies whatever's
    been sold, we pay it back to the Federal Reserve.
        Ms. Kaptur. And how much have you paid back to the
    taxpayers of the United States?
        Mr. Liddy. Several billion dollars. I don't have the
    exact----
        Ms. Kaptur. Billion? Several billion?
        Mr. Liddy. Yes.
        Ms. Kaptur. So it was paid to the Federal Reserve. That
    doesn't necessarily mean it's deposited in the Treasury to be
    refunded to the American people, I take it?
        Mr. Liddy. That's correct. It's in satisfaction of the debt
    that we owe to the Federal Reserve.
        Ms. Kaptur. All right. So you could provide more accurate
    numbers, dates, and amounts returned to the Federal Reserve----
        Mr. Liddy. Yes----
        Ms. Kaptur. Since the original infusions to AIG?
        Mr. Liddy. Yes.
        Ms. Kaptur. And could you also submit for the record, a
    list of your board of directors, please?
        Mr. Liddy. Sure.
        Ms. Kaptur. Thank you.
        Next question. Approximately how much have you paid out to
    your employees in bonuses and dividends to your shareholders
    over the last 6 months?
        Mr. Liddy. We've paid no dividends to shareholders. We're
    not allowed to do that. As soon as we received help from the
    Federal Reserve, all dividends to the shareholders were not
    allowed.
        Bonuses. There are so many ways to slice this number. I
    just can't answer it. If you would give us the time to respond
    in writing, that's a better way to do that, and we will do that
    shortly.
        Ms. Kaptur. All right. We would very much appreciate that
    as soon as you can give it to us.
        Let me ask you, the funds AIG has been given by the
    American people, 40 percent of it was then redirected to other
    Wall Street firms, as I understand it. And the largest
    recipient was Goldman Sachs, that received $12.9 billion. Is my
    understanding correct?
        Mr. Liddy. Yes. There are two or three firms that received
    double-digit--you know, $10, $11, $12, $13 billion in
    settlement of legal contracts.
        Ms. Kaptur. Yes. And at least five of those that received
    these funds are the worst offenders in the subprime market,
    including JP Morgan Chase, Wachovia, Citigroup, HSBC, Bank of
    America. It's very interesting to see who got funds, when
    they're responsible for three-quarters of the subprime mess in
    the housing market that this country is facing.
        I would ask you to use your power, since you've given them
    money, to get them to do loan workouts at the local level,
    where citizens are outraged that companies like JP Morgan
    Chase, which is the top of my bad-boys list for not returning
    phone calls.
        Thousands and thousands of families in places like Ohio are
    affected by their recalcitrance, and arrogance. And it offends
    me to see that they get money and they perform so poorly.
        But my question in regards to Goldman Sachs. Could you
    clarify your relationship with Goldman Sachs, the largest
    recipient of these counterparty funds through AIG, $12.9
    billion? What years did you serve as a member of the board of
    Goldman Sachs, please?
        Mr. Liddy. I was on the board for approximately 5\1/2\
    years. Don't remember the year exactly I went on, but I exited
    that relationship as soon as I became the chairman and CEO of
    AIG back in September 2008.
        Ms. Kaptur. September 2008. Is there a specific date?
        Mr. Liddy. Tendered my resignation as soon as I could get
    to it, within a week or 10 days of my being appointed.
        Ms. Kaptur. Did you leave in early September or late
    September?
        Mr. Liddy. It would be after September 18th, but before
    September 30th.
        Ms. Kaptur. After September 18th. Thank you. Is it true
    that you served as chairman of the audit committee of the
    Goldman Sachs?
        Mr. Liddy. I did for the last year of my service.
        Ms. Kaptur. All right. So you would have done that through
    middle-to-late September last year?
        Mr. Liddy. Yes.
        Ms. Kaptur. All right. Bloomberg News reported on April
    17th that you currently own 27,129 shares of Goldman Sachs
    stock. Is that true?
        Mr. Liddy. Yes.
        Ms. Kaptur. All right. Could you please estimate the market
    value of that to date?
        Mr. Liddy. $3-plus million.
        Ms. Kaptur. All right. And you currently hold that?
        Mr. Liddy. No, I don't. I own about 8,000 shares outright,
    which I bought when Goldman Sachs went public in 2000-2001, and
    the rest of it I receive as compensation as a director. I did
    not take any cash. I took it in deferred stock, the deferred
    stock you can't get at until you retire from the board. And
    some time in May or June that would be available to me. So it's
    been restricted.
        Ms. Kaptur. But in any case, you have a direct interest in
    Goldman Sachs. You have a financial interest in Goldman Sachs.
    And I understand you may also have some other type of agreement
    with them, where you were paid some type of lump sum?
        Mr. Liddy. I don't have any other type of agreement with--
    --
        Ms. Kaptur. So your only interest would be the stock then?
    Several million dollars?
        Mr. Liddy. Yes.
        Chairman Towns. The gentlewoman's time is expired.
        Ms. Kaptur. I thank you, Mr. Chairman.
        Chairman Towns. Congressman Souder from Indiana?
        Mr. Souder. Thank you. I'm going to yield to the ranking
    member in a minute. I didn't want to repeat questions when I
    was over at Homeland Security earlier.
        But I have a question on the bonuses. What on bonuses at
    AIG, what percent of a normal salary typically before all this
    happened would bonuses be? In other words, is it an integral
    part of someone's pay or is it intermittent? Is it a small
    amount, 5 percent? Is it----
        Mr. Liddy. It's literally all over the lot. There's 115,000
    people who work at AIG, so typically that bonus as a percentage
    of the base would be lower, at the lower ends of the
    organization, and higher as you work higher into the
    organization.
        Mr. Souder. And since, just like at Goldman Sachs you were
    getting stock dividends, that was as a trustee, did AIG get
    stock dividends, or were they always cash?
        Mr. Liddy. No. At AIG you could have a base salary. You
    could have an annual performance bonus and then there'd be a
    long-term bonus. The long-term bonus would be stock, and at the
    time you were expected to hold that stock until you retired
    from the company, and if you left before you retired, you could
    lose it.
        Mr. Souder. And my understanding as we've gone through
    these different hearings is the argument for the bonuses was,
    is that we needed to retain personnel. The company could fold,
    and particularly keep personnel.
        Is that----
        Mr. Liddy. Again----
        Mr. Souder. Not the last round on the legal argument, but
    this has been going--AIG has had these problems way back before
    December. And the question is that in the bonus round, part of
    the feeling was, and what my question is to follow that--and
    you can explain if that's not true--is that right now there's
    not a lot of whole lot of other types of jobs available,
    certainly with the resume coming off of some of the problems at
    AIG, it would be a very difficult time to do that.
        In my district, we're getting hammered by unemployment.
    They're looking at the bonuses, and they're saying ``We don't
    get bonuses when our company goes down. We get laid off.''
        And it becomes problematic as to why AIG would need the
    bonuses to retain personnel, why AIG would be paying such huge
    bonuses, when I have some companies in my district where
    bonuses can be 40 percent of their normal salary, and they're
    not getting any bonuses.
        Why is it unique in your industry and firm? Are they like
    commissions? And I'd just like to hear a little bit more of an
    explanation.
        Mr. Liddy. Sure.
        Mr. Souder. Because I don't know how to explain it, because
    I haven't heard a good explanation anybody's buying.
        Mr. Liddy. Mm-hmm. I think we need to be careful with how
    we use that word, bonus, because it can represent so many
    different things, and it's what's caused members of this
    committee some frustration, so let me see if I can quickly
    explain it.
        There are normal annual performance bonuses; if you do a
    good job on this, in addition to your salary you'll get 15, 20,
    25, 40 percent over and above that.
        So I guess you could look at it as a commission, but it's
    in our industry. It really is a performance based bonus.
        That was earlier in the day we had the conversation about
    that total, about $450-some million paid over the entire
    breadth of our company and against a payroll of some $7.5 to $8
    billion in size.
        So that's one form of a bonus, an annual variable pay or a
    performance bonus.
        Then there were retention bonuses put in place. I think the
    ones you were referring to are at AIG FP. They were designed in
    2007, put in place in 2008.
        And when we decided and knew that we were going wind that
    business down, we asked people to stay, to not leave until they
    accomplished certain things: Sell a book of business, make it
    less risky. To the extent they did that, they were paid a
    retention bonus or an award, again, for some level of
    performance.
        So it depends upon which area of that you're really poking
    at.
        Mr. Souder. In other words, I understand the basic choices.
    I've been in the middle of companies before I came to Congress
    that had all those different ranges. Sometimes things like
    annual performance bonuses don't become performance bonuses.
    They become expected. And that my question is so were
    dividends, yet your dividends are zero.
        So why would the company have made decisions to continue,
    at any level, things that are supposed to be performance based?
    Did you have a big exodus of employees at different times,
    indeed? Was it critical to the survival of the company? Because
    it seems odd that you were saying to the people who invested--
    many of whom were trust funds and retired people, people who
    owned that--that you get nothing, but we're going to continue
    things that are supposed to be performance-based, when the
    performance of AIG was not good for an extended period of time,
    not just the last few months.
        Mr. Liddy. Well, I think, Congressman, you have to break it
    down into pieces, so the total performance of the business as a
    whole may not have looked good because it was severely damaged
    by one or two enterprises--but then there were a host of other
    enterprises that performed well.
        And to the extent that those people who work in those
    businesses earned those performance bonuses, they would have
    been paid. If they didn't earn them, they would have gotten
    zero.
        Chairman Towns. The gentleman's time is expired.
        Mr. Souder. It's an interesting thing that people with the
    stock didn't get treated the same way.
        Chairman Towns. Thank you very much.
        Gentleman from Rhode Island, Mr. Kennedy.
        Mr. Kennedy. Thank you, Mr. Chairman. Welcome, Mr. Liddy.
        I think you obviously heard a great deal of frustration
    from many people here, because obviously we represent our
    constituents, who are undergoing a great deal of economic
    struggle, and as you no doubt understand yourself, are very
    frustrated just with their own economic circumstance, and after
    having seen the travails of the financial system, are
    questioning the very basic foundation of our financial system
    in every form.
        And that's the reason why these questions seem so directed
    at you, but please understand, we understand that your goal is
    to try to get the best deal possible for the taxpayer. And
    believe me, in doing so, it will be for the best interest of
    all of our constituents that AIG is able to pay back the
    taxpayer, and certainly I think all of us are interested in
    that.
        And certainly taking your expertise to be able to do that
    will be something that we're all interested in seeing being
    fruitful and successful.
        One of the things that I think will be of a great deal of
    concern, I know, for all of our constituents down the road, as
    you've heard echoed over and over again with respect to these
    bonuses, is this notion of transparency.
        And when you started in your remarks talking about how, you
    know, AIG is the parent company, and you talked about
    separating off various other entities from AIG, I think that
    what it raised in terms of questions with respect to Project
    Destiny and how you're going to move forward, is when we as a
    Congress passed limitations on, you know, future bonuses, you
    know, from being used out of the TARP, the question is, is
    whether these future, if you will, special purpose vehicles,
    these separate entities that are no longer part of ``AIG
    proper'' are going to be considered TARP recipients for
    purposes of the rules and governance of these bonuses.
        And as such, you know, all I know is that if my
    constituents here a couple years down the line, that there's a
    subsidiary of a TARP recipient whose CEO is pulling down some
    huge bonus, albeit it's a successful subsidiary and you know,
    it's helping to kick back the dollars that we need for the
    taxpayers overall, it's just going to drive them nuts.
        And so, what I need to get an answer from you now is: are
    these kind of separate companies, are they going to be under
    the same governance for purposes of the TARP regulations that
    AIG is under?
        Mr. Liddy. If they're still owned by AIG and a part of AIG,
    yes, it's our understanding they absolutely will be. There will
    come a point in time when they're completely disassociated from
    AIG. They're totally separate companies.
        That will be a good day, because that means we will have
    gotten dollars, and we've used those dollars to repay the
    Federal Government--either the loan to the Federal Reserve or
    the TARP dollars.
        I suspect when that occurs, because they will not be TARP-
    related at all, then they would not be subject to it. But that
    would be a good thing. As long as they're owned by AIG and a
    part of AIG, and AIG is subject to TARP dollars, then the
    subsidiary and pieces of AIG are subject too.
        Mr. Kennedy. Mr. Chairman, I'd just call your attention to
    this. I think it's going to be a fine line where we're going to
    have to watch. Because I guarantee it's going to come back and
    bite us all in the behind, if we're not careful in terms of
    what constitutes something that's owned by AIG or something
    that's now no longer part of AIG, because it's been spun off by
    AIG.
        American people aren't going to look at it so clearly as,
    you know, maybe lawyers might. And we all are going to be in
    the soup politically, if we're not careful. And I just would
    like to make sure that we are very sensitive to that.
        For purposes of the fact that down the road, we're going to
    need to go back to the taxpayer on occasion to get them to, you
    know, have their confidence in their Federal Government.
        And if they don't have confidence that we were true to our
    word at the beginning, and if they perceive that there was some
    kind of shades of gray here that we're held back and not fully
    forthcoming, they are going to feel as if nothing was on the
    level.
        And I just worry about the kind of perception that it's
    going to create, in terms of future efforts on our part to get
    any kind of support in the future for our financial system,
    which, of course, as you know, has been key to our being able
    to recover the confidence that we needed in order to keep this
    financial system from going completely belly up.
        I'd also like to ask just----
        Chairman Towns. The gentleman's time is expired.
        Mr. Kennedy. OK.
        Chairman Towns. The gentleman's time is expired.
        Mr. Kennedy. Thanks.
        Chairman Towns. Congressman Turner.
        Mr. Turner. Thank you, thank you so much, Mr. Chairman.
        Ranking member, I appreciate your continued focus on the
    issue of the financial crisis that we've had, and how that we
    look further into holding people accountable.
        My community has been significantly impacted by the
    mortgage foreclosure crisis, which was a precursor of the
    financial meltdown that we saw in our financial industry.
        My primary county in my district of Montgomery County, with
    a population of approximately around 500,000, since I have been
    in Congress for 6\1/2\ years, has had 27,000 foreclosures,
    27,000 foreclosures in an area of about 500,000 people.
        Most recently, last week, this Congress moved forward with
    calling for a commission that would look at the mortgage
    foreclosure crisis and its contributions to the financial
    crisis.
        When the financial crisis was first identified, there was a
    discussion of the issue of toxic assets, which people described
    as mortgage-backed securities. And we know that AIG had issues
    with mortgage-backed securities, and also credit default swaps
    that were related to mortgage-backed securities.
        From the experience in my community, where we had the
    mortgage foreclosure crisis, what we saw with those individuals
    at the Fair Housing Lending Center saw, and others who tried to
    impact this and to assist families that were going through it,
    is that the loan-to-value ratio of loans that the families
    received, primarily through refinancing started with the family
    being underwater--meaning that the value of the loan that the
    family was given exceeded the value of the property.
        I'm from Ohio. We're not an area that has had wild
    speculation in property values and escalation, modest
    appreciation. So that a loan-to-value ratio where you're
    underwater, where you start the loan underwater, structurally
    is a loan that if there's any difficulty at all is going to go
    to foreclosure.
        The asset, of course, is not valued high enough to back the
    loan as collateral, and the family is left with leaving the
    home sometimes to abandonment, and to the financial
    institutions.
        This commission that's moving forward is going to take a
    look at this issue. It's going to take a look at the issue of
    how did we get into this problem of the mortgages that were
    granted?
        And I believe that what we're going to see is probably the
    largest theft or fraud in history, where there was a systematic
    effort to give people loans that either exceeded the value of
    their property or were in such a high loan-to-value ratio that
    the loan itself was likely to result in foreclosure.
        So, sir, what I want to ask you is: I'm looking for
    documents where our financial institutions had knowledge or
    knew that this process was happening.
        I believe that if there were mortgage-backed securities
    that were issued, where the issuers knew that the collateral
    was insufficient to support the value of the loan, that's
    fraud.
        I believe that if the loan-to-value ratios are not
    disclosed to subsequent purchasers, that it affects the very
    level of the risk for the mortgage-backed securities, and
    therefore, I think that also is fraud.
        And it certainly affects the value of the underlying
    mortgage and the suspicion that it would have a higher
    likelihood for default.
        I understand you have a very big organization, but I am
    assuming that somewhere along the way, someone in your
    organization--an analyst, someone who is reviewing the
    processes of the trading of mortgage-backed securities, the
    issuing of them, the issuing of mortgages--someone who is
    looking at this, may have brought to the attention of the
    company, or others that there was a problem with the loan-to-
    value ratios that were being packaged and then traded.
        Because I can tell you that in my community, on the ground,
    the problem existed.
        So my question to you is: Has anyone ever discussed this
    issue with you that there was a problem with the loan-to-value
    ratio of the underlying mortgages inherent in the mortgage-
    backed securities that were subject to credit default swaps?
        And also, would you be willing to share with this
    committee, for the purposes of sharing with the commission
    that's going to be empaneled, any documents or information that
    you have, where there is a discussion of how that loan-to-value
    ratio affects the level of risk for the mortgage-backed
    securities, with it being out of whack?
        In other words, any documents that you have where someone
    says, ``I have a concern that this loan-to-value ratio is such
    that the loan exceeds the value of the asset, that the
    collateral is insufficient to support the value of the loan,
    the mortgage, that lack of collateral value and that excessive
    loan-to-value ratio affects the level of risk for these
    mortgage-backed securities, and therefore their ultimate
    value?''
        Mr. Liddy. Yes. I would add one thing to what you just
    said. In AIG's--particularly AIG FP's situation, we ensured
    those values. So it wasn't just one individual home. They all
    went into a pool, and different institutions would aggregate
    those pools. So what would come out of it, you'd have 100,000
    loans.
        So you didn't get to look at the loan-to-value ratio at
    each one of those. You'd look at the rating. Many of those were
    rated triple-A by the rating agencies, and when the AIG FP
    people underwrote them, they took at face value that they were
    triple-A rated.
        So we have some of the same angst over the situation, as
    you do. We'll help you in whatever you'd like and any way we
    can. I just caution you that we're kind of down at the bottom
    of the food chain as well, and by the time we looked at these
    things, they had been aggregated to a point where we didn't
    look at loan-to-value ratios on an individual house; we looked
    at them, at a whole pool of items.
        So we may not be a source of information that you're
    seeking. If we are, we'll help you with it. But we could be a
    source, at a minimum, equally frustrated. Because we assumed,
    we took at face value that these were triple-A rated. They were
    not.
        Mr. Turner. And that's why I'm asking for your help.
    Because if we have this commission empaneled and they're given
    the responsibility to look at it, this is going to be like
    pulling threads to get to what was, I believe ultimately a
    systematic process for this to occur.
        And you might have information that helps lead us in the
    right direction.
        Mr. Liddy. And if we do, we'll be delighted to share it
    with you.
        Chairman Towns. The gentleman's time is expired.
        The gentlewoman from California, Congresswoman Speier?
        Ms. Speier. Thank you, Mr. Chairman. Thank you, Mr. Liddy,
    for appearing before the committee and answering our questions.
        Let me just at the outset underscore something you said now
    a couple of times. Today and once before the hearing before the
    Financial Services Committee. And then one way or another, you
    said AIG should return to its core operations, to its knitting,
    as you put it.
        That would suggest that we should reinstate the Glass
    Steagall Act, doesn't it?
        Mr. Liddy. I'm not sure if we should go back to it, but we
    should sure have a very rigorous debate between whether what
    we've allowed to happen has gone too far.
        Ms. Speier. Well, you, by your own admission today, said
    you should never have been involved in derivatives. It was
    Glass Steagall that gave you the opportunity to get involved in
    derivatives.
        Had you been just an old-fashioned insurance company with
    reserves that you had to maintain, none of this would have
    happened, correct?
        Mr. Liddy. Oh, with respect to AIG and our insurance
    operations versus AIG FP, correct. But I don't necessarily--my
    response to you was meant to suggest I don't necessarily know
    that I would generalize from our situation to the overall Glass
    Steagall situation.
        Ms. Speier. All right. Let's kind of talk about where we
    are. When Secretary Paulson came before us, he said we're going
    to get all of our money back from AIG; in fact, we'll make
    money.
        We spend a lot of time around here talking about a 79
    percent interest that we own AIG; except for the fact that we
    have no say.
        And that's the big problem. The taxpayers are absolutely
    apoplectic about the fact that there were hundreds of bonuses
    of a million dollars or more given to AIG employees, who
    brought this company down, and the taxpayers are picking up the
    tab.
        Now, my question to you is: On the heels of what the
    gentleman from California, Mr. Issa asked earlier: Can we
    really ever expect that the taxpayers are going to be repaid? I
    mean, if in fact you're talking about $70 billion in TARP
    money, another $50 billion that we paid for Maiden Lane, and
    another $60 billion in a loan from the Fed. And you're worth $5
    billion.
        I mean, we've all got to be scratching our heads. How can
    you possibly repay the taxpayers?
        Mr. Liddy. Well, the $5 billion is what's worth after
    you've sold many of the good assets and paid off many of your
    liabilities, including the Federal Reserve and all the other
    debt that we have.
        So some of the businesses that I've mentioned in the course
    of our discussion today, a business like AIA, it's probably got
    a value of $25 billion. A business like ALICO, it probably has
    a value of 18. Our property casualty business has a book value
    of $35 or $38 billion.
        So you just keep going down the list, and there's great
    opportunity for the taxpayer to be repaid. But--sorry to be
    repetitive--it's very much a function of what happens to the
    economy and what happens to the capital markets.
        Ms. Speier. How much did the Financial Products Unit pay in
    taxes? Or did it pay anything in taxes since it was located in
    London?
        Mr. Liddy. The taxes would have been, their earnings would
    have been added in with all the other earnings of the
    businesses that comprise AIG to get an aggregate number, and we
    would have paid taxes to the appropriate jurisdiction on that
    aggregate number.
        So if that's important to you, we'll get you the number in
    terms of what we've paid in taxes over the last couple of
    years. But AIG FP would have just been a piece of it.
        Ms. Speier. But if it was located in London, I mean, it
    could have been a tax haven for AIG, could it not? And all of
    the profits just retained in AIG FP and not brought back to the
    United States, and therefore taxes not paid on it.
        Mr. Liddy. Yeah. It would depend upon where those taxes
    were recognized. And as we sit here right now, I just don't
    have the answer to that.
        Ms. Speier. Would you report back to the committee on
    precisely how much AIG paid in total in taxes, and then if in
    fact AIG FP paid any taxes at all?
        Mr. Liddy. Mm-hmm.
        Ms. Speier. The GAO recently came out with a report in
    April, recommending that all the contracts be renegotiated
    regarding executive compensation at a AIG, if and when the $30
    billion was sought by AIG.
        I presume you've seen that report, and I'd like you to
    comment on it.
        Mr. Liddy. You, we are trying to do that in many cases,
    particularly with respect to FP. We're going back to the
    contractual arrangements that were entered into at the end of
    2007, beginning of 2008. They call for retention payments in
    2010. We are working now to restructure those payments to make
    them more performance oriented. We're going to comply with
    whatever the rules and regulations are that come out when the
    Treasury promulgates them.
        Ms. Speier. And I guess my final question--although my time
    is now up--I will yield back.
        Chairman Towns. Thank you very much.
        We're not going to have a second round. But if you have a
    question, I will recognize you to ask your question.
        Congressman Kucinich.
        Mr. Kucinich. Thank you very much, Mr. Chairman and Mr.
    Liddy.
        The AIG had a filing with the Securities and Exchange
    Commission recently, in which was included a letter that you
    sent to individuals who were to receive bonuses. If you need
    to, I have a copy of the letter to refresh your memory.
        Now in this letter--this letter by the way was sent 4 days
    after you became the CEO, you became the CEO on the 18th, the
    letter was sent on the 22nd--it was a little more than a week
    after AIG received $85 billion from the Fed.
        And what you write--and after you called for transparency,
    you wrote a letter to employees who were disclosed the
    company's recent SEC report, saying, ``As this special award is
    being made to a very select group of executives, I ask that you
    treat it as confidential.''
        The letter goes on to assure this select group that ``in
    the event the AIG entity that is your employer, the company,
    experiences a change in control that is consummation of a
    merger, consolidation, statutory share exchange and similar
    form of corporate transaction involving the sale or other
    disposition of all or substantially all of the company's assets
    to an entity that is not in an affiliate of the company, AIG
    guarantees the payment of the 2008 special cash retention award
    on the dates and under the conditions specified above.''
        First of all, you are familiar with that letter, are you
    not?
        Mr. Liddy. I haven't read it in quite a while, so I'm
    familiar with the issue, yes.
        Mr. Kucinich. OK. Based on that letter is it true that even
    if the United States took over AIG 100 percent that these
    bonuses would be awarded?
        Mr. Liddy. No. In fact, many of them have not. Many of them
    have been restructured, or they have been--the payment of them
    has been delayed, and we're looking at revising them and trying
    to figure out how do we pay them? How do we keep people that we
    need to run these businesses? But how do we honor both the
    spirit and the intent of what comes out with the Treasury
    regulations?
        Mr. Kucinich. So you're telling this committee that it is
    the position of AIG management, of which you're the CEO, that
    this letter that you sent, that's part of your SEC filing, is
    no longer operative?
        Mr. Liddy. No. It's what causes us such difficulty,
    Congressman. We have that letter, which can be viewed as a
    contract; but we have a new set of events, which says it's
    going to take a lot longer to pay back the American taxpayer.
    How do we balance those two? How do we balance a commitment
    that we made, with the understanding that we have right now,
    that the fact that it's going to take us longer to repay the
    American taxpayer?
        It's difficult. We need the leadership of this business, of
    our businesses, if we're going to keep them viable, sell them,
    and pay back the taxpayer. So that's where there's great
    tension in the system right now. How do you keep the
    leadership, pay them competitive wages, honor a commitment like
    that, but still be responsive to whatever new legislation is
    put in place?
        Mr. Kucinich. So do you intend to honor the commitment that
    you made in the letter?
        Mr. Liddy. I'm going to wait to see what comes forward from
    the Treasury to see if those kinds of payments are permitted,
    if they need to be restructured, if they need to be more
    performance-based. I just don't have enough information to
    answer the question. And I'm told that those rules and
    regulations will be forthcoming in a number of weeks.
        Mr. Kucinich. Will you be able to let this committee know
    whether or not you intend to honor the letter that says that
    you're going to pay bonuses to people, essentially that they'd
    be able to collect bonuses at taxpayers' expense, even if the
    government has a bigger stake?
        Mr. Liddy. Yes. Many of those dollars, to the extent they
    go to people that are senior executives, that would have to be
    reported, we'd have to make an 8-K filing or a 10-Q filing.
    You'll know it.
        Mr. Kucinich. Well, because the reason why I ask if we'd
    know, Mr. Chairman, is because you had asked the previous
    recipients of this letter to keep the matter confidential. So
    are we to expect a more forthcoming approach, more transparency
    in the dealings with this committee? Or are you going to have
    the confidential relationships with your employees to pass on
    bonuses to them, without this committee being aware of it?
        Mr. Liddy. No. We intend to be transparent in everything
    that we do.
        Mr. Kucinich. Thank you, Mr. Chairman.
        Chairman Towns. All right. Let me just say this before I
    recognize Congressman Tierney. You know, Mr. Liddy, I hope you
    recognize what people on the street are saying. You know, like
    when I go home to Brooklyn, they are saying, ``How do you pay a
    person, give him a bonus, when they have failed? They put us in
    this mess, and now you're going to give him a bonus for it.''
        I mean, I don't know how we answer people when we hear
    that. So I think that you need to really keep that in mind, as
    you move forward, because that's the thing that the people out
    there are so angry about.
        And then of course when they say it's a retention, why
    would you want to retain them? You know. And that's what we're
    hearing in the street.
        And I don't know whether or not, you know, you're getting
    this as you talk to people, but that's the thing that we're
    really, really getting.
        And then the other one is they say to us, you know, ``Why
    would you give them, you know, a retention bonus? First of all,
    they've failed. And the fact that the economy is so messed,
    where can they go?''
        I mean, these are issues that are being raised. So I just
    think, you know, so you can sort of get a feel from our
    frustration up here, as we deal with our constituents in terms
    of how we answer this.
        And believe me, that's an issue that's been raised, you
    know, day in and day out.
        I yield to the Congressman from Massachusetts, Congressman
    Tierney.
        Mr. Tierney. Thank you, Mr. Chairman.
        Mr. Liddy, when Hank Greenberg was in front of this
    committee, I asked him whether or not he believed that AIG
    should have been allowed to go bankrupt, or whether they should
    have been bailed out. And his answer was that he thought that
    the company should have been allowed to go bankrupt, that would
    not have created a systemic problem.
        What's your response to that? What do you believe to be the
    case?
        Mr. Liddy. I wasn't there when that decision was made, and
    neither was Hank, so that----
        Mr. Tierney. No----
        Mr. Liddy. That was the decision that the Treasury and
    Federal Reserve made. You know, as I examine the situation, I
    think it would not have been good if it had gone bankrupt.
        And the reason I think that is first, the institutional
    shock wave at that time--I mean, those were dark days in the
    middle of September when people were very concerned about the
    survivability of the worldwide financial system.
        So we had had Fannie and Freddie being taken over. We had
    had Bear Stearns several months before that. We had WAMU, we
    had the failure of Lehman Brothers. I think if AIG had gone
    bankrupt, it really would have sent shockwaves through the
    system.
        So I think the passage of time has led me to conclude it
    would not have been a good idea to do that.
        AIG also, not just institutionally, from a retail
    standpoint, an individual customer standpoint, we have 81
    million policies. Life insurance, pensions, retirement and
    savings plans. The difficulty of managing something that large
    in 130 different countries, regulated by 400 regulators, would
    have been something the world has never seen.
        So I think it would have created much more difficulty than
    the current situation that we find ourselves would have.
        Mr. Tierney. And yet we could still end up there?
        Mr. Liddy. You know, we have a plan that we don't think
    puts us there. You just, you never know what's going to happen.
    As I've said many times, we are so dependent upon what happens
    with the economic recovery and what happens to the values of
    our assets, which are driven by the capital markets.
        We think we have a plan that prevents that, it's a good
    plan. It takes time to implement.
        Mr. Tierney. I just note there's a distinct possibility to
    me that would not have been good, which I think the way you
    phrase it, and whether or not it still should have been allowed
    to go bankrupt, because, you know, no bankruptcy situation is
    good.
        The question really would have been: Would it have been
    catastrophic or would it have been systemic?
        Mr. Liddy. Yes.
        Mr. Tierney. And your belief is that it would have?
        Mr. Liddy. I think it would have been catastrophic and
    systemic. As I said, the folks that had to make that decision,
    they were making that decision not in a vacuum, but in the
    context of an awful lot of other moving pieces. And people I
    think were genuinely afraid of the damage that an AIG
    bankruptcy could do on top of the heels of the Lehman Brothers'
    bankruptcy.
        Mr. Tierney. Thank you.
        I yield back, Mr. Chairman.
        Chairman Towns. Thank you very much.
        Yes, Congresswoman Marcy Kaptur.
        Ms. Kaptur. Thank you, Mr. Chairman.
        Going back to Goldman Sachs, Mr. Liddy, as a member of the
    board of Goldman Sachs through last September, were you
    involved in any of the meetings or discussions leading up to
    the disposition of Lehman Brothers or Bear Stearns, during
    which time advice was given to Treasury Secretary Paulson, the
    former chairman of Goldman Sachs, on those institutions'
    disposition?
        Mr. Liddy. Yes. Anything that would have transpired before
    whenever I resigned, which I think is the 23rd, 24th, 25th, if
    there were board meetings on those subjects, I would have
    participated in those meetings.
        Ms. Kaptur. Yes. And how would we obtain minutes of those
    meetings, and a full understanding of your role?
        Mr. Liddy. I don't keep any records like that. You'd have
    to go to the Goldman Sachs general counsel and ask them for
    that.
        Ms. Kaptur. Mr. Chairman, I would very much like to ask
    that the committee use its subpoena power to obtain those
    records.
        Let me ask this. Today there are many people staffing you.
    We recognize some of their faces. And I'm wondering if for the
    record, those individuals who currently are working for AIG
    directly or on contract to AIG, could stand up in the audience
    and provide for the record the organizations or firms for which
    they work and the terms of their contract? For those
    individuals that are currently under contract or working
    directly for AIG, could you please stand up?
        Thank you. Anyone else? Anyone else?
        All right. I'd appreciate it very much if those firms and
    the contracts could be made a part of the public record, Mr.
    Chairman.
        Chairman Towns. Without objection, so ordered.
        Ms. Kaptur. I thank the gentleman very much, and I have two
    additional requests for information. One, Mr. Liddy, can you
    provide for the record the names of individuals who in late
    1998 or thereabouts worked for and ran the AIG Financial
    Products Division, created it actually, and developed and
    issued the first credit default swaps, and also any internal
    documents related to the initiation and development of AIG's
    credit default swap and route of activity, from its inception?
        Mr. Liddy. Congresswoman, what was the year, I'm sorry? The
    year was?
        Ms. Kaptur. When it started. You referenced the year 1998?
        Mr. Liddy. Oh, AIG FP started in 1987.
        Ms. Kaptur. All right. When did the credit default swap
    piece of it get started?
        Mr. Liddy. Well, I'll have to get you the exact date. I
    understand your request, so whenever they started----
        Ms. Kaptur. I want the historical development of that
    division. It appears to be very important. When you appeared
    before Congress a couple of weeks ago, you said only 20 people
    worked for that division. Is that possible?
        Mr. Liddy. No. There were 400 people in that division. The
    folks that worked in the credit default swap area, there were
    probably 20 of them. But there were only three or four who
    designed the multi-sector credit default swaps that caused us
    the difficulty that we're in.
        Ms. Kaptur. Well, I think it's important for us to unwind
    back to the beginning of what happened. So we would look for
    the information about that inside of AIG. And if goes back to
    1987, then let's see when it morphed, and when it became
    something other than what it was originally, and who actually
    did that.
        I understand, did that occur in England, or in this
    country, the actual creation of the idea to do that?
        Mr. Liddy. I think Mr. Greenberg started it in 1987 and
    then it got ramped up to a greater extent in the late 1990's
    and early 2000's, and it would have been simultaneously in
    Connecticut and London.
        Ms. Kaptur. I think it's very important for us to
    understand what happened. And I think seeing who worked for
    that instrumentality inside of AIG from inception through the
    morphing that happened after Glass Steagall's upturning by
    these Congress would be most interesting.
        Also to provide for the record all materials your firm
    possesses on the $2.2 billion diverted to Dresdner Kleinwort in
    Germany, and particularly the financial assessments made to
    justify their receipt of funds, how does Dresdner Kleinwort get
    involved in all this, particularly since they have been in deep
    trouble in Germany, and are being acquired by Commerce Bank and
    by Allianz Insurance Group in Germany?
        I'm very interested in how you got involved in Dresdner
    Kleinwort. Do you wish to comment for the record on that at
    this point?
        Mr. Liddy. No. That was all before my time. I don't have
    any sense of it at all.
        Ms. Kaptur. All right. It's my understanding that Dresdner
    Kleinwort, through some process I would like to unravel, became
    the possessor of a great deal of subprime housing paper from
    this country. I would like to know how it was transferred to
    them? Through which firms and what years? And what caused them
    to collapse?
        Mr. Liddy. Yeah. I just don't know that we have any
    information on that whatsoever. To the extent we had a
    relationship with them, we'll provide you the material.
        Ms. Kaptur. Well, you've given them $2.2 billion.
        Mr. Liddy. Right----
        Ms. Kaptur. You must have some kind of relationship with
    them.
        Mr. Liddy. But I would assume that will be satis--in some
    sort of a credit default swap contract, or what have you. But
    all the other information, you know, how much did they
    participate in subprime lending, we wouldn't have that
    information.
        Chairman Towns. The gentlewoman's time is expired.
        Ms. Kaptur. Were you ordered to give them the $2.2 billion
    by the Federal Reserve?
        Mr. Liddy. The Federal Reserve, when we set up Maiden Lane
    3, took responsibility for the settlement of all of those
    credit default swap contracts.
        Ms. Kaptur. Thank you.
        Chairman Towns. Yes. Thank you very much.
        Mr. Issa. Thank you, Mr. Liddy.
        Boy, I've got a couple of ones that I know are sort of like
    you've heard before. But what I wanted to say first was, please
    consider taking this $400-plus million in bonuses, breaking it
    down, not necessarily just for one member, but for the public,
    into those people who were generating EBIT in sections of the
    company that are providing positive cash-flow and positive
    EBIT.
        And let people understand that these are performers who are
    delivering real value, who should be rewarded because you need
    that profit as part of your going concern.
        And then whatever's left, we can argue about. But I'm
    hoping for the sake of all of us on the--and for the public, we
    make it very clear that even in a company that's having bad
    times, even when a car dealership is only selling 12 cars, you
    still pay a commission to the guy that sold 11 of them.
        OK. You pay a bonus to the guy that sold 11 out of the 12
    cars.
        Mr. Liddy. Mm-hmm.
        Mr. Issa. So to the extent that you have those individuals,
    whatever dollars, I think those performers--maybe not by name,
    but by category, should be identified so the American people
    don't see a big number and assume that this was all just a
    giveaway.
        I spent too long in business to not understand your problem
    of keeping good people that can keep the ship afloat,
    particularly the ones that are producing in divisions that are
    producing.
        I want to get to one closing set of questions, though. Your
    predecessor, I guess two ago, Mr. Greenberg, when he came to
    us, he not only told us that you should have filed bankruptcy,
    but he basically led me to believe that you had an obligation
    to file bankruptcy. The Treasury had an obligation. Everyone
    had an obligation.
        When you had a going concern opinion, you stop working for
    the stockholders and you start working for the secured
    creditors. That's just a reality of your board, that as viable
    going concern, you maximize shareholder value. As soon as you
    are not a going concern, you have to look to your in-order
    preferred creditors, secured creditors, and you have an
    obligation to them.
        Mr. Greenberg led us to believe--and I've checked with
    bankruptcy experts, and it appears he's right--that tens of
    billions of dollars were paid out that had your firm filed
    bankruptcy, would not have been paid, because the corpus that
    was bankrupt was firewalled from other parts of the company;
    therefore, yes, FP would have gone bankrupt. It would have
    delivered whatever assets it had. Other claims against the
    company to the extent they existed, would have been cleared in
    bankruptcy.
        But huge parts, some of the very companies you're talking
    about that have large value, would have been fire-walled from
    that.
        How do you respond to that?
        Mr. Liddy. I think the regulators in those 130 countries
    that we do business would have grabbed those insurance assets
    and would have held onto them and wouldn't have released them
    to anybody.
        And there would have been a very substantial debate
    internationally about who owned and who controlled those
    assets.
        Mr. Issa. So what you're saying is you couldn't count on
    the rule of law, so that's why the Treasury ordered you to pay
    moneys to people like Goldman Sachs, who you paid with dollars
    that were put into the corpus and paid out of the corpus in
    excess of any kind of value that it had, but are burdened to
    the parent company around what otherwise what would have been a
    firewall?
        Mr. Liddy. Well, once a decision was made not to declare
    bankruptcy, that sets in motion a whole series of events. You
    have to honor the contracts. The Federal Reserve decided that
    we should pay 100 cents on the dollar. That 100 cents on the
    dollar should be paid in the settlement of those various----
        Mr. Issa. Yeah, but these were credit default swaps that I
    could have bought for a fraction of that on an open market to
    the extent that somebody was floating them at the time, right?
        So we paid more than their current value at the time we
    paid them off.
        Mr. Liddy. I believe that's what the Federal Reserve
    decided was in the best interests of the financial system.
        Mr. Issa. OK. So the Federal Reserve paid a premium. I just
    want to make sure we have it, because we have three trustees
    we're entrusting with our money, going forward.
        The Federal Reserve paid a known premium, and they paid it
    not to FP--so that we're all talking about FP--they paid it to
    the parent company and caused you to take onto your balance
    sheet and your stockholders to be diluted, based on a decision
    the Treasury made for you not to file bankruptcy, and in fact
    for you to go down there way.
        And as you said, they made the decision. You got your
    instructions from the Fed and Treasury. That's what you've said
    here, right?
        Mr. Liddy. Well, the Federal Reserve, it's not just getting
    instructions. The Federal Reserve handled those discussions and
    negotiations to settle those counterpart----
        Mr. Issa. Right. So the question I'm going to be asking the
    trustees, going forward--because they're in a similar
    situation, but a little different than you--your board and you
    had an independent responsibility to your stockholders, now 20
    percent, used to be 100 percent, and to other creditors, that
    when the decision was made outside of your company not to go
    into bankruptcy, and the decision was made to take all of the
    assets otherwise not encumbered in a normal firewalled
    situation, and put them in, your company today, whatever it's
    worth, owes this money to the Treasury, to the American people,
    but it owes it based on decisions that were made, that were not
    prudent on their face for your company.
        May have been prudent for the world, may have been prudent
    for the financial markets, but they weren't prudent for your
    company in the ordinary course of you get to make the decision.
        Mr. Liddy. Well, Congressman, it could turn out that they
    were very prudent. It's all a matter of whether, at the end of
    this whole situation, we're able to pay back the American
    public all the money that's been either loaned to or invested
    in AIG.
        Mr. Issa. But I just asked you what your enterprise value
    is worth in the last round.
        Mr. Liddy. Right.
        Mr. Issa. And I asked you so you'd have an opportunity to
    take the $35 billion here, the $40 billion here, and say
    ``These enterprises, after we get into a good situation, are
    worth X amount--''
        Mr. Liddy. Mm-hmm----
        Mr. Issa. Offsetting, you know, 100 percent of the debt
    potentially, and returning--because a year ago, a year and a
    half ago, you could have been worth $100 billion for your stock
    price--I agree that our investment of $40 to $70 billion at the
    height of your stock in the last 2 years would have been whole.
        My question to you, though, was--and I'd like you answer
    for the record--is: Break down what you believe the enterprise
    value is today. Mr. Kashkari, when he was before this
    committee, told us he didn't know what he paid for things and
    he didn't know what they were worth, and he couldn't answer it,
    but he'd give us a report in 30 days. He resigned in roughly 29
    days, apparently, so he's not back.
        Mr. Liddy. Mm-hmm.
        Mr. Issa. Please do not think that you're not going to be
    back before us, if you can't answer what you believe today the
    enterprise value is, so that given a static economy--not pie in
    the sky and not future earnings, but the real value of your
    enterprise, what it's worth. What have the American people
    bought for $190 billion?
        Mr. Liddy. Mm-hmm. The assets minus the liabilities,
    including all the money that we owe, either to the Federal
    Reserve or to TARP, that number is what's left over, and that's
    what represented in that 2.7 billion shares at $1.85 or so a
    share. But that's after you settle all of the obligations.
        Mr. Issa. So your answer today is: We're completely
    solvent, other than our $40 billion has become 70 percent of $4
    billion? That's where we are. That's that answer you're giving
    me here today when you answer that way, is that assets and
    liabilities balance in the enterprise value. What's left is the
    hypothetical market, that the market is saying, which is $4
    billion. And that's $40 billion of our money and the rest is
    the shareholders'.
        So that says we have a loss, in your statement, of that
    delta, call it $38 billion.
        If that's what you believe, fine----
        Mr. Liddy. No, no----
        Mr. Issa. But that's what the market is marking your stock
    for. What I asked you for was your real belief of your
    enterprises, individual enterprises value.
        You know, you can normalize them for multiples of EBIT--
    what their PEs would be in an orderly market, what their PEs
    would be on a separate company basis. You know all the ways to
    value it.
        I just think this committee should have an understanding of
    today what you believe the enterprise, which you're running and
    the trustees are overseeing, is worth, in a way that we can
    have some understanding of why you think you'll pay us back
    over and above what you gave us here today.
        And I appreciate the fact that the stock is whatever it is
    on a given day. What I want to know--and I think the chairman
    and I both want to know--is just how you value these assets
    normalized.
        We understand you may not realize them for 2 years; but we
    have been asking for those kinds of numbers since the previous
    president and previous everybody in this cycle.
        Mr. Liddy. Mm-hmm. And I'll just take one more crack at it.
    Those assets, if you take the assets that I just talked about
    earlier and added them all up, they'll add up to, whatever $80
    or $90 million. I can't do the math that fast. And that should
    be enough to satisfy the $83 billion that we actually owe to
    either the Federal Reserve or the U.S. Treasury now.
        To the extent we have to use more of the $30 billion, we
    hope that we'll be able to get, recover that value by having
    even higher asset values, because we plug an asset hole, or
    what have you.
        So the asset values should be sufficient to satisfy what
    all of the obligations of the company are, and keep the
    taxpayer whole. If the marketplace stays strong. That leaves
    only the stub residual value, which right now is that $5 or $6
    billion. And hopefully this all works out well, and that's
    worth more and more.
        Chairman Towns. I thank you very much, Mr. Liddy. Thank
    you. Thank you very much for your testimony, and you can see,
    based on the questions here, that we are frustrated. And
    people--gentlewoman? Yes. Just a moment. I was getting ready to
    let you go, but we have Congresswoman Maloney.
        Mrs. Maloney. Well, first of all, I want to thank you for
    your public service and for coming in to help out.
        Why did AIG meet the criteria of systemic risk while Lehman
    Brothers did not?
        Mr. Liddy. Congresswoman, you'd have to ask the Treasury
    Secretary and the Federal Reserve, the New York Federal Reserve
    individual that made that decision at the time.
        Mrs. Maloney. Mm-hmm. They made determinations that
    municipalities and foreign governments were of systemic
    importance to the U.S. banking system. Do you share that
    belief?
        Mr. Liddy. I think the totality of AIG represented systemic
    risk, not just to counterparties, but the guaranteed investment
    contracts, and all of the policyholders that we have, I think
    had that failed, I think it would have created a real problem.
        Mrs. Maloney. What proportion of the AIG counterparties
    would have faced bankruptcy, without Federal bailout of AIG?
        Mr. Liddy. I do not know.
        Mrs. Maloney. And have you seen or could you provide the
    committee with any analysis of the impact of the ownership of
    the residential mortgage-backed securities by AIG's life
    insurance companies, including whether problems in AIG's life
    insurance business, as a result of their purchase of these
    played a role in the decision to provide the bailout?
        Basically, I have heard that the life insurance portion of
    AIG was regulated and was solvent. Is that true or not, that
    the life insurance portion did not receive, nor did it need
    bailout, that it was properly managed?
        Mr. Liddy. It was regulated and it was solvent. But as
    values of the residential mortgage-backed securities went
    down--because that was part of the investment that they had, it
    created a hole, and that hole has been, we've plugged some of
    that hole with money from the Federal Reserve.
        Mrs. Maloney. So Federal Reserve money has gone into that?
        Mr. Liddy. Yes.
        Mrs. Maloney. And AIG argued that the bailout was necessary
    because of potential problems in the life insurance business.
    And you believe that is true.
        Mr. Liddy. I do.
        Mrs. Maloney. How much went into the life insurance
    division, roughly?
        Mr. Liddy. It was somewhere between $17 and $20 billion----
        Mrs. Maloney. Really----
        Mr. Liddy. To make up for the loss in asset values.
        Mrs. Maloney. Really?
        And going forward--I read in the paper that AIG does not
    need another infusion of public money. Do you foresee that in
    the future you will not need any public money, additional
    public money?
        Mr. Liddy. Congresswoman, I certainly hope so, as I've said
    many times. We think what we have, we have a good plan that
    will enable us to repay the American taxpayer. But it's very
    dependent upon what happens with the economy and what happens
    with global financial markets. If they were to go south, the
    way they did in the fourth quarter, that could change. If they
    remain stable or improved, the way they appear to be doing,
    that would be good news for our efforts.
        Mrs. Maloney. Well, let's hope they remain moving in the
    right direction.
        Again, I want to thank you for coming in as public service
    to help restructure one of America's great businesses.
        And finally, some employees of AIG are questioning the
    breakup of the company. They're saying that this is really not
    good for the future of a competitive business in America. And
    could you comment on the breakup and the selling off of assets
    at AIG?
        Mr. Liddy. I think in many of those companies that are
    going to receive separate identities and will be spun off
    company, those people are excited about that prospect. So in an
    AIA or an ALICO, there's great excitement about those
    businesses.
        With respect to our property casualty business, where we'll
    sell at least a minority interest in it and will separate from
    the AIG name, there's great excitement there.
        Mrs. Maloney. Mm-hmm.
        Mr. Liddy. If you work maybe in a technology area or an
    operations area, in the corporate core, you might have a
    different thought about it, because your job could be
    eliminated or you could get picked up by one of those companies
    as they get spun off.
        Mrs. Maloney. And finally, the insurance division was
    regulated, but also the risky products division was regulated
    under the Office of Thrift Supervision, the regulator that AIG
    selected because they had a small portion of their company that
    was an S&L.
        Could you comment on the quality of regulation coming out
    of the Office of Thrift Supervision, on the so-called risky
    products AIG financial products?
        Mr. Liddy. Congresswoman, I can't. Although the last time I
    was before Congress, there was an individual from the OTS, who
    if I remember his testimony, said, you know, they just didn't
    have the wherewithal to be able to regulate something as
    massive and complicated as AIG Financial Products.
        Mrs. Maloney. Again, thank you for your public service and
    we appreciate it. Thank you.
        Chairman Towns. Thank you very much, Congresswoman. And I
    also thank you, Mr. Liddy, for your time. And of course we
    appreciate you coming. And thank you so much for the
    information that you've given us.
        But as you can see on this side, there's a tremendous
    amount of frustration, and that we're trying to answer
    questions that are being raised, and at the same time, we also
    are trying to protect the American people's tax dollars, which
    is also very important.
        So we thank you very, very much for coming today.
        Mr. Liddy. Thank you.
        Chairman Towns. Now I'd like to welcome the second panel.
    But let me say it's a longstanding tradition here that we swear
    our witnesses in first. So, if you would please stand and raise
    your right hands.
        [Witnesses sworn.]
        Chairman Towns. Thank you. You may be seated. Let the
    record reflect that the witnesses all answered in the
    affirmative.
        Let me suggest an order. Why don't we go in this order: Mr.
    Feldberg will go first, and then of course Ms. Considine, and
    then Mr. Foshee would be next. And then Professor Verret.
        So why don't we just proceed right down the line.
        Mr. Issa. If you could pull the mic up and turn it on,
    please? Thank you.
        Chairman Towns. Let me just----
        Mr. Feldberg. How about----
        Chairman Towns. Just yield for a second. I guess I need to
    probably talk about your background a little bit for the
    members of the committee.
        Ms. Jill Considine, who currently serves as chairwoman of
    the Board of Fulcrum Group, a fund administrator for the hedge
    fund industry. In 2004 Ms. Considine ended her 6-year term as a
    member of the Board of the Federal Reserve Bank of New York,
    where she served as chairwoman of the Audit and Operational
    Risk Committee.
        We also have Mr. Chester Feldberg. Mr. Feldberg served for
    9 years as Senior Official at the Federal Reserve Bank of New
    York. He served as chairman of Barclays America from 2000 to
    2008.
        Mr. Douglas Foshee is currently CEO of El Paso Corp., a
    natural gas producer. Mr. Foshee served as executive vice
    president chief operating officer for Halliburton Corp. prior
    to joining El Paso in 2003. Mr. Foshee also serves as chairman
    of the Federal Reserve Bank of Dallas, Houston Branch.
        Our final witness is Professor J.W. Verret, a senior
    scholar at the Mercatus Center at George Mason University.
    Professor Verret will share his concerns about the AIG trust
    agreement.
        So with that, we can move forward. Mr. Feldberg.

    STATEMENTS OF CHESTER B. FELDBERG, TRUSTEE, AIG CREDIT FACILITY
     TRUST; JILL M. CONSIDINE, TRUSTEE, AIG CREDIT FACILITY TRUST;
      DOUGLAS L. FOSHEE, TRUSTEE, AIG CREDIT FACILITY TRUST; AND
      PROFESSOR J.W. VERRET, GEORGE MASON UNIVERSITY SCHOOL OF LAW

                    STATEMENT OF CHESTER B. FELDBERG

        Mr. Feldberg. Chairman Towns, Ranking Member Issa and
    members of the committee. My name is Chet Feldberg, and I'm a
    trustee of the AIG Credit Facility Trust. I'm appearing today
    with Jill Considine and Doug Foshee, my fellow trustees, at the
    request of the committee, in connection with its hearing on the
    collapse and Federal rescue of AIG.
        We've submitted a joint written statement, which speaks for
    all of us. As trustees, we operate collectively. While each of
    us will make brief oral statements addressing different aspects
    of our work, I would stress the collaborative nature of our
    efforts and of our decisionmaking process.
        I was going to comment next on my background and
    experience, but the chairman has covered that, so I will move
    forward. The chairman's letter to each of us posed the
    question, ``Is the U.S. taxpayer investment in AIG being
    properly protected?''
        This is the critical question. It motivates all of our
    deliberations, and all of our actions.
        Let me now turn to the background of the trust arrangement.
    The trust was established by the New York Fed for the purpose
    of acquiring, holding, and ultimately disposing of
    approximately 77.9 percent of the voting stock of AIG. Under
    the terms of the trust agreement, we the trustees are charged
    with exercising the voting rights of the AIG shares held in the
    trust in the best interests of the U.S. Treasury, and with a
    view toward maximizing the value of that stock.
        As we understand it, the rationale for establishing a trust
    arrangement administered by independent trustees was concern by
    the Fed and the Treasury regarding potential conflicts of
    interest if the controlling interest was held by either
    governmental entity.
        Each of us was contacted last fall by representatives of
    the New York Fed and asked to serve as a trustee of the
    proposed trust. After much reflection, each of us ultimately
    decided to accept this challenge and responsibility.
        On January 16, 2009, we were appointed as trustees by the
    New York Fed and entered into the trust agreement, which we are
    attaching as part of our written testimony.
        We immediately began organizational work in educating
    ourselves about the task that lay ahead. But it was not until
    March 4th that AIG issued stock to the trust, and we commenced
    our formal responsibilities as trustees.
        Since then we've been impressed with the extraordinary
    challenges we face in exercising our responsibilities. In fact,
    many of the factors relevant to whether the value of the
    taxpayer's stock can be--maximized are not within our control.
        Such factors include what the market and the economy will
    look like when company assets are sold or restructured, what
    decisions the Federal Reserve or the Treasury will make
    concerning ongoing financial assistance to the company, what
    constraints will be imposed by new legislation or regulation on
    the company's ability or obtain the people needed to keep the
    company running and effectively implement the restructuring
    plan; and finally whether continuing adverse publicity will
    affect the company's ability to maintain the value of its
    businesses.
        Each of these factors individually or in combination will
    have great influence on the ultimate value of the enterprise.
    And no one can confidently predict the final outcome at this
    time.
        The trustees are committed to seeing through the next
    chapter in the company's history in the best interests of the
    Treasury and the taxpayers of this nation.
        We're under no illusions that our task will be easy.
    Indeed, it may be the most challenging task any of us has
    undertaken in our professional careers.
        In carrying out our role, we will be guided by our
    independent assessment and judgment as to what course of action
    will best protect the interests of the beneficial owners of the
    trust, the U.S. Treasury, and the U.S. taxpayer.
        We know that to be successful, we will need the ongoing
    support of the Congressman, the administration, and the Federal
    Reserve. In the end, we are all working toward the same goal.
        I appreciate the opportunity to appear before this
    committee. My colleague, Jill Considine, will not explain our
    duties and limitations under the trust agreement in more
    detail.
        Thank you.
        [The prepared statement of Mr. Feldberg, Mr. Foshee and Ms.
    Considine follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Towns. OK.
        Ms. Considine, you're recognized for 5 minutes.

                      STATEMENT OF JILL CONSIDINE

        Ms Considine. Mr. Chairman, ranking member, my name is Jill
    Considine, and I want to thank you for this opportunity to
    testify and share information pertaining to the
    responsibilities as a trustee of the AIG Credit Facility Trust.
        I'd like to begin by describing a little bit my experience
    in both government and in the financial services industry. I
    served as a banker, a banking regulator and as the chief
    executive officer of systemically important financial
    institutions. Each of these experiences has proven invaluable
    as I participate with the other trustees to execute our
    responsibilities and maximize the government's investment in
    AIG, and most importantly, protect the interests of the
    American taxpayer.
        I previously served as CEO of the First Women's Bank, was
    the New York State Banking Superintendent, and served as
    president of the New York Clearinghouse Association. In
    addition, I was the chairman of the CEO of the Depository Trust
    and Clearing Corp., and as was mentioned, was a member of the
    board of the Federal Reserve Bank of New York.
        I agreed to serve as a trustee, understanding the
    importance and urgency of the mission we were being asked to
    undertake, and with a sense of duty to the taxpayers, whose
    interest to shareholders in AIG we were asked to represent. Now
    with respect to the particular role we had been assigned, we
    know that we're in uncharted waters. There is no history, no
    precedent to which we can look for guidance. Our anchor is the
    trust agreement itself, which describes our roles, our
    responsibilities and also our limitations.
        The primary responsibility on the trust agreement is to
    vote the stock that we hold at all meetings of the
    stockholders, and most importantly in connection with the
    election of directors of AIG; to develop and execute a plan to
    sell or otherwise dispose of the trust stock in a value-
    maximizing manner, and of course to work with senior management
    and the board of directors of AIG to ensure that corporate
    governance procedures are satisfactory to us.
        However, equally important, the trust agreement says what
    we should not do, and we cannot directly or indirectly become
    directors of AIG or be responsible for managing the day-to-day
    operations of AIG or any of its subsidiaries. Explicitly, by
    the terms of the trust, we must leave the day-to-day direction
    and management of AIG to the senior officers of the company and
    its board of directors.
        Now there's been a lot of conversation today and in the
    past about the congressional and public concern over bonuses
    paid, and we share these concerns about the payments of large
    bonuses at the time when AIG was failing and being rescued by
    the taxpayers. However, we are committed to ensuring that
    issues of compensation at AIG going forward are addressed in a
    thoughtful, prudent and fair manner. It is essential that the
    board of directors focus on compensation because a fair and
    effective compensation system is truly necessary to ensure the
    successful restructuring of AIG and the recovery of the
    taxpayers' investment. In our view, compensation should be
    designed to be performance-based, to reward long-term,
    sustainable value creation, and align employees' compensation
    with those of the shareholder over the long term. It should not
    be structured to encourage and reward undue risk taking or
    short-term results.
        To these ends, we've asked Mr. Liddy, together with senior
    management at AIG, the board and the appropriate committees, to
    undertake a broad review of the compensation programs currently
    in place throughout AIG and to develop a comprehensive
    compensation program that applies to AIG as a whole. I'm
    honored to serve with my colleagues, Mr. Feldberg and Mr.
    Foshee in this important role. Mr. Foshee will now describe
    other aspects of our work, particularly with respect to the
    board of directors.
        Mr. Clay [presiding]. Mr. Foshee, you're recognized for 5
    minutes.

                     STATEMENT OF DOUGLAS L. FOSHEE

        Mr. Foshee. Ranking Member Issa and members of the
    committee, I'm Doug Foshee. I'll begin my testimony by
    providing you with some brief information on my background and
    experience. I've spent 27 years in business. I was a banker in
    Texas for almost a decade, have been employed by two global
    companies and have served in leadership roles in so-called
    turnaround situations. I serve on the boards of two Fortune 500
    companies, and as mentioned, serve as chair of the Houston
    branch of the Dallas Federal Reserve Bank.
        Perhaps my most relevant experience as it relates to AIG,
    though, is my current full-time job as chairman and CEO of El
    Paso Corp. I came to El Paso in the wake of a tumultuous time
    for the company. Stock prices falling precipitously, employees
    indicted and convicted, credit downgrades leading to cash
    collateral calls, and a trading company that included over
    40,000 trades, inadequate risk management systems, more than
    one restated financial statement, rumored bankruptcy, a highly
    publicized proxy fight that forced a replacement of management,
    and substantial change in the board, innumerable government
    investigations, and tragically, the loss of morale of its long-
    time committed employees, most of whom had nothing to do with
    the decisions that led to the near demise of this great 80-
    year-old company.
        I joined El Paso in 2003 to try, along with a very
    committed and talented group of employees to turn all this
    around. Since then, the team has divested over $17.5 billion in
    assets, reduced debt by half, returned our pipelines investment
    grade rating, and the company has been recognized by Fortune
    magazine as one of its most admired companies in 2008. The
    statistic we're most proud of, though, is that in our 2008
    biennial employee survey, 91 percent of our employees said
    they're proud to work for our company as relates to 40 percent
    in 2004.
        I'm serving as a trustee simply because I believe that to
    whom much is given, much is expected. I feel a deep sense of
    obligation to the U.S. taxpayers to act as a good steward of
    the investment that has been made in AIG, and I'm honored to
    serve in this capacity with my two co-trustees.
        One of our most important responsibilities as trustees is
    to ensure that AIG has an effective, independent and capable
    board, and that this board is focused on recruiting and
    maintaining a strong and effective management team dedicated to
    prosecuting the company's long-term plan. This allocation of
    responsibility between us on the one hand and the board and
    management on the other, in addition to being set forth
    explicitly in the trust agreement, replicates what is the
    accepted standard for good corporate governance for public
    companies in America.
        For these reasons, we've spent considerable effort focused
    on AIG's board of directors, how it functions, what skills the
    board members have, and how those skills fit with the needs of
    a company in AIG's extraordinary circumstances. We've come to
    the conclusion that if AIG is to succeed it needs a fresh
    start, a reset if you will, a reset in the eyes of Congress,
    the American public and other important constituencies.
        We've recommended five new highly competent, highly
    capable, independent candidates to the board. We expect that
    the board will approve those candidates soon, that their names
    will appear in the proxy statement that the company will be
    issuing within a week, and that they will be elected at the
    upcoming shareholders meeting. These five additions plus Mr.
    Dammerman, Ms. Nora Johnson and Mr. Liddy, and another new
    director proposed by the company, will give the company
    effectively nine new board members. We believe that this action
    is wholly consistent with our overriding objective as trustees
    to maximize the long-term value of the equity held by the AIG
    trust, and we look forward to supporting the newly constituted
    board as it carries out its tasks.
        In closing, let me say that as trustees, we recognize there
    are many, many constituencies that have a perspective on, in
    many cases a stake in, the outcome of AIG. Most of them wish it
    to succeed. Some do not. In the end, though, our focus is on
    maximizing the long-term value of the equity that the AIG trust
    holds. It is through this lens that we see two constituencies
    to be of significant underappreciated importance--the customers
    of AIG and the employees of AIG. If we all as taxpayers wish to
    recover our investment in AIG, then everything begins with
    them. They watch TV and they read the newspapers. Every day,
    AIG's employees have a choice about where to work, and every
    day AIG's customers have a choice about where they buy their
    insurance and other financial products. If they don't choose
    AIG, then it is a mathematical certainty that the value of this
    asset, that we now all own collectively a piece of, will go
    down. We need to keep these constituencies in mind when the
    rest of us, the trustees, and respectfully, the Treasury
    Department, the New York Fed, and the Congress decide how best
    to proceed.
        Thank you, Mr. Chairman.
        Mr. Clay. Thank you.
        And Mr. Verret, you're recognized for 5 minutes.

                   STATEMENT OF PROFESSOR J.W. VERRET

        Mr. Verret. Chairman Towns, Ranking Member Issa and other
    distinguished members of the committee, I want to thank you for
    the opportunity to testify today. My name is J.W. Verret. I am
    an assistant professor of law at George Mason Law School and
    also a senior scholar at the Mercatus Center Financial Markets
    Working Group. I also serve as the lead investigator for the
    Corporate Federalism Initiative, a network of scholars
    dedicated to studying the intersection of State and Federal
    authority in corporate governance.
        My focus today will be the trust document set up by the New
    York Federal Reserve Bank to manage the U.S. taxpayers'
    investment in AIG. Make no mistake, this document represents a
    grave risk to the American taxpayers' $180 billion investment
    in AIG. I'm also concerned by the AIG trust because of the
    precedent it sets. Secretary Geithner has announced his
    intention to create another trust to manage the Treasury's
    investment in Citigroup as well as other TARP participants. If
    the AIG trust, crafted during the Secretary's tenure as
    president of the New York Fed, is used as a model for these new
    entities, the risk to taxpayers will be multiplied many times
    over.
        My concerns are structural and in no way directed at the
    trustees themselves. By all accounts, they are professionals of
    the highest caliber, and their nation owes them a debt of
    gratitude for their generous service in this time of economic
    crisis. Today my focus will be the three most troubling
    provisions of the AIG trust. One requires the trustees to
    manage the trust in the best interest of the Treasury rather
    than the U.S. taxpayer specifically. Another offers generous
    protection against liability for the trustees, and a third
    permits the trustees to invest personally in investment
    opportunities that may otherwise belong to AIG.
        The first dangerous provision is Section 3.03(a). That
    section defines the fiduciary duty of the trustees as being to
    manage the investment in AIG, ``in or not opposed to the best
    interests of the Treasury.'' In other financial entities tasked
    with managing wealth on behalf of others, the fiduciaries must
    manage that wealth to maximize value for their beneficiaries.
    This is true for mutual fund trustees, ERISA retirement plan
    trustees, and boards of directors of publicly traded companies.
    This provision threatens the entire purpose of the trust
    itself, which is to create an independent buffer between the
    short-term political interests of an administration and the
    long-term health of the nation's financial system. Maintaining
    this buffer between short-term political interests and long-
    term financial soundness is critical.
        The economic evidence from around the globe is
    overwhelmingly clear. Political ownership in private banks and
    financial companies results in lower GDP growth, increased need
    for subsequent government bailout, and politicized lending
    practices. For instance, in Italy, banks with government
    ownership lend at lower rates in the south since that area is
    politically important to the ruling coalition in parliament. I
    am concerned about the temptation that we may someday see TARP
    banks and other financial companies encouraged to subsidize
    lending, for instance, in battleground States. This is why
    requiring the trustees to manage the trust in the best interest
    of the Treasury and not the U.S. taxpayer is so very dangerous.
        A second provision in the trust that I find troubling is
    the corporate opportunity provision located in Section 3.05(b).
    Typically, fiduciaries are prohibited from stealing investment
    opportunities that they learn about through their performance
    as a fiduciary or trustee and using those opportunities for
    themselves. The AIG trust permits the AIG trustees to
    potentially secretly invest personally in investment
    opportunities they learn about through their performance as
    trustees without the necessity to even inform or seek
    permission from AIG or the Treasury or the Federal Reserve.
    This strikes me as unnecessary and particularly dangerous given
    the potential for the AIG trust to serve as a model for other
    similar documents.
        A third threat to the American taxpayer located in this
    trust document are the indemnity and immunity provisions of
    Sections 3.03(a) and 3.03(d). These stand out as the most
    generous liability protections I have ever seen offered to
    managers of wealth and represent significant deviations from
    standard and best practice in corporate governance.
        Under no circumstances are public companies permitted to
    indemnify directors for bad faith actions or actions not in the
    best interests of their beneficiaries. The AIG trust has no
    such limitation on trustee indemnification. I am aware of no
    ERISA or mutual fund trustee or director of a public company
    granted such a generous immunity from liability to their
    beneficiaries as the AIG trustees are in fact afforded. And I
    can see no good reason why those best practices should not
    apply here.
        In short, a trust in which the trustees cannot be held
    accountable by their beneficiaries isn't much of a trust at
    all. It is vital that when an organization manages wealth on
    behalf of others, the ship's compass always point in the right
    direction, no matter who stands at the helm. For this reason, I
    am recommending that the flaws in this document be revised and
    at the very least not repeated in future trusts set up by the
    Treasury. I thank you for the opportunity to testify, and I
    look forward to answering your questions.
        [The prepared statement of Mr. Verret follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Issa. You finished exactly at 5 minutes on the button.
    Thank you so much, Professor. Let me start this round of
    questions. Can I ask you, when is your next shareholders'
    meeting? Mr. Foshee.
        Mr. Foshee. The shareholders meeting hasn't been set. It's
    expected that the company will file its preliminary proxy
    within about the next week, and following that I believe within
    about 10 days, a final proxy, and then following that, a
    shareholders' meeting which I think we would expect would be
    toward the end of June.
        Mr. Clay. Are some of the items that will be discussed at
    this meeting include your executive compensation proposal and
    revamping the composition of the board?
        Mr. Foshee. Certainly the five independent directors that
    we've recommended to the board and the one new director that
    the company has recommended to the board will be the subject of
    a subsequent vote by the board of AIG, and we expect their
    names to be included in the preliminary proxy filed within
    about a week.
        Mr. Clay. How about the executive compensation proposal?
        Ms. Considine. If I may address that. The executive
    compensation, the letter that we sent requested the board and
    management and the relevant board committees to come up with a
    well defined compensation program. That does not go before the
    shareholders. But in it we would want pay for performance, we
    would want to have an overarching compensation philosophy,
    reward of long-term, focus on eliminating short-term risk that
    is rewarded, and also benchmarking the compensation packages
    that are going to be recommended to other companies that are in
    similar circumstances, size and complexity and ask for periodic
    updates to the trustees so that we can track to make certain
    that we have a comprehensive, well architected compensation
    program from all of AIG.
        Mr. Clay. Out of curiosity, what is the compensation of
    current or former board members? And is that in line with other
    corporations?
        Ms. Considine. Well, let me remark on that. Initially the
    board members were paid in board fees, retainer and also in
    shares, and I would say prior to the financial crisis were
    making between $200,000 and $300,000 a year per director. This
    year the directors voted to decrease their compensation to
    $75,000.
        Mr. Clay. I see. Thank you for that.
        Mr. Foshee. I just would add, which is substantially less,
    probably less by more than half, than the average Fortune 50
    company, public company.
        Mr. Clay. Let me ask the three of you, how do you plan on
    voting on these matters? And are other issues up for a vote? I
    mean on the item of revamping the compensation or revamping the
    composition of the board, how do you--Mr. Feldberg.
        Mr. Feldberg. Essentially, that proposal is our proposal. I
    mean, we've been working very hard for the last month or two to
    put together this package of five new exceptional directors for
    the company, so we will be enthusiastically supporting that at
    the shareholders meeting.
        Mr. Clay. In your opinion, is AIG too big to fail?
        Mr. Feldberg. If you go back to when the decision was made
    by the Federal Reserve and the Treasury that it was too big to
    fail, I don't have all the information today that they had when
    they were making that decision. But if you ask me my best
    judgment as to what the situation was then, I would have said
    yes, it was too big to fail.
        Mr. Clay. OK.
        Mr. Feldberg. Now whether it should have gotten to that
    point, you know, is a totally different issue. But where things
    sat at the point that they felt they had to act, if I had still
    been in that seat, I think I would have been arguing the same
    case.
        Mr. Clay. As far as the trustee model that you all operate
    under, and this is the first time that we can find that this
    model has been put in place by the U.S. Government, what is
    your opinion of the trustee model? Is it a well-oiled machine
    or one that needs to be thoroughly revamped and revisited, and
    if so, how?
        Mr. Feldberg. I think these are early days and I would
    emphasize that. I would also say that we didn't have anything
    to do with the decision by the Fed and the Treasury to develop
    the trustee model. So, you know, it wasn't invented here. I
    understand the problem that the Treasury and the Federal
    Reserve had that gave rise to their looking for a mechanism
    that would permit the stock to be voted in the best interests
    of the government but without the potential for conflict of
    interest. And I think this is a reasonable model to do it.
        We've been working together as a team since the end of
    January, and intensely since we got the stock. I think the
    three-trustee model and the way the trust authorizes the three
    trustees to proceed has so far been an exceptional model. It
    expects us to act through a consensus, and to the maximum
    extent possible to act in unanimity. It does provide a
    mechanism so that if we cannot agree, two of the three trustees
    could go forward. To this point, I think I can say without
    hesitation that we have been able to talk things out and
    operate on every decision we've made, and there haven't been
    all that many, but every decision has been----
        Mr. Clay. I hate to cut you off. Any other panelists?
        Ms. Considine. Yeah. Let me just take up on that because,
    you know, we were involved in crafting the mission as it was
    reflected by the trust agreement. You know, we didn't set up
    the structure initially, but we really believe that it can
    work. We've been working with it. We've been working under it,
    and we sometimes ask ourselves what else, what's the
    alternative? And perhaps if you looked at it, the only
    alternative would have been direct government control, and that
    would have been nationalization, and that was not the intent of
    this.
        So we serve as the trustees. We're maximizing the value for
    the taxpayer, and we believe that it has functioned well, and
    we're pleased with it so far.
        Mr. Clay. Thank you.
        Mr. Foshee. I just--I feel some obligation to----
        Mr. Clay. You aren't compelled to answer, Mr. Foshee. If
    you want to, you can.
        Mr. Foshee. I just feel like we probably need to rebut some
    of the things that were said by my colleague to the left,
    because we disagree with him. The beneficiary of the trust is
    in fact not the U.S. Treasury Department. It is in fact the
    U.S. Treasury. Now I'm not a lawyer, but as a lay person, I can
    tell you what I believe, and I believe that is the U.S.
    taxpayer.
        Second, with regard to some ability to secretly take a
    business opportunity, there is in fact a provision in the trust
    that says that we cannot take a business opportunity away from
    AIG, but the fact is we all have other jobs, and if I have an
    opportunity for El Paso Corp., what the trust says is I don't
    have to share that business opportunity from El Paso with AIG,
    which I would think most people would think would be pretty
    reasonable.
        And last, we would just respectfully disagree that the
    indemnification agreement provided in the trust is
    inappropriate, and in fact it complies with Delaware law and
    many other States and we're, as trustees, more than happy to
    put our reputational risk in front of this committee and act on
    behalf of the U.S. taxpayers. We feel responsible to each other
    in addition to the taxpayers, and to all of you. And we thought
    and still believe that the indemnification provided was
    appropriate.
        Mr. Clay. Thank you for that.
        Mr. Verret. Mr. Chairman, if I may----
        Mr. Clay. Mr. Verret, I'm going to let you have some brief
    comments, so you may proceed.
        Mr. Verret. Thank you, Mr. Chairman. First, with respect to
    the definition of what treasury means in this document,
    unfortunately it's particularly unclear. Treasury Department is
    a defined term which in corporate legal drafting is something
    we do to make sure that every time we use a term in a document,
    the definition is consistent. So we put it in bold, we put it
    in parentheses, we highlight it as much as possible. So
    Treasury Department is defined as the U.S. Department of the
    Treasury. Treasury, though, as mentioned in the applicable
    standard of care section is not a defined term. It's not in
    bold, and it's very vague about its definition.
        Now I think it is perfectly consistent to understand that
    might mean the Treasury Department. That might also mean
    treasury, as in the general fund, in which case it still
    doesn't necessarily mean the same thing as maximizing
    shareholder value. Anything that might be good for the general
    fund, for treasury's expenses, maybe they want to do something
    discretionary but they can get AIG to fund it instead as a
    subsidy on AIG's books, could be in the best interests of the
    treasury, in the general fund, but not in the best interest of
    maximizing the taxpayers' investment.
        Second, with respect to the corporate opportunity
    provision, I would offer only quickly that it would permit them
    to take opportunities that would otherwise belong to AIG. It's
    crafted specifically that way. And third, just with respect to
    indemnification, as a former clerk for the Delaware Court of
    Chancery, I can offer my professional opinion with respect to
    Delaware law that this indemnification in here is not legal
    under Delaware law. It's not permitted by the Delaware general
    corporation.
        Mr. Clay. All right. Thank you for that. And we are going
    to go to Mr. Kucinich. We're going to be a little lopsided for
    a minute.
        Mr. Kucinich. Thank you very much, Mr. Chairman. Mr.
    Feldberg, how often do trustees meet? And could you speak into
    the mic, please?
        Mr. Feldberg. Yes. We have decided as a matter of
    discipline that we will meet at least once a week, and at least
    one of those meetings a month will be in person. So the
    absolute minimum has been a meeting a week.
        Mr. Kucinich. So you meet telephonically then at least----
        Mr. Feldberg. At least a telephonic meeting a week and one
    in-person meeting a month. However, that's the minimum. Without
    having numbers, hard numbers I can give you, I would say that
    we probably met in person at least twice a month since we've
    been operating.
        Mr. Kucinich. Are minutes kept of your meetings?
        Mr. Feldberg. Yes.
        Mr. Kucinich. Can you make available to this committee the
    minutes of your meetings?
        Mr. Feldberg. Those minutes, under the terms of the trust
    agreement I believe, are provided to the Federal Reserve Bank
    in New York and I think are their property. I suspect that
    you'd have to go to the Federal Reserve Bank in New York to get
    them.
        Mr. Kucinich. So the minutes of your meetings are not your
    property, they're the property of the Federal Reserve Bank of
    New York?
        Mr. Feldberg. That may be a little strong.
        Mr. Kucinich. Well, that's what you just said.
        Mr. Feldberg. I know, and I may have been a little strong
    in saying that. But it is my understanding that the minutes
    belong to the Federal Reserve. I could probably use the advice
    of counsel to be sure I've got it right, because I don't want
    to mislead you.
        Mr. Kucinich. Mr. Chairman, I think that in order to be
    able to evaluate the work of these trustees, I think it's
    imperative that this committee get the minutes of their
    meetings and get their phone logs so we can know what they talk
    about.
        Now, Mr. Feldberg, when did you become a trustee?
        Mr. Feldberg. When the trust agreement was first signed
    in----
        Mr. Kucinich. What was the date?
        Mr. Feldberg [continuing]. In January. The specific date?
    January 16th of this year.
        Mr. Kucinich. So you never had any discussions, then, with
    anybody at the New York Fed regarding the $8.5 billion in
    payments to Barclays as a counterparty?
        Mr. Feldberg. Absolutely none, Mr. Congressman.
        Mr. Kucinich. And do you--so your decisions really are not
    transparent then? We really don't know what you do as a trustee
    if we don't get--if you can't produce minutes.
        Mr. Feldberg. Well, I didn't say we can't produce minutes,
    sir. I said that I think we need to check with the Federal
    Reserve Bank of New York before committing to something.
        Mr. Kucinich. Well, you worked for the Federal Reserve Bank
    of New York. Is that correct?
        Mr. Feldberg. I did, yes.
        Mr. Kucinich. And how long did you work for them?
        Mr. Feldberg. Thirty-six years.
        Mr. Kucinich. OK. And were you asked by officials of the
    Federal Reserve Bank of New York to be a trustee?
        Mr. Feldberg. Yes I was.
        Mr. Kucinich. OK. And Ms. Considine, you worked for the--
    you were a member of the board of the Federal Reserve Bank of
    New York. Is that correct?
        Ms. Considine. That's correct.
        Mr. Kucinich. And were you asked by the Federal Reserve
    Bank of New York to be a trustee?
        Ms. Considine. Yes I was.
        Mr. Kucinich. And who made that request of you?
        Ms. Considine. Tom Baxter, who is the general counsel.
        Mr. Kucinich. And Mr. Feldberg.
        Mr. Feldberg. The same, Tom Baxter.
        Mr. Kucinich. And do you report to the Federal Reserve Bank
    of New York on a regular basis?
        Mr. Feldberg. I would say that we have conversations with
    the Federal Reserve Bank of New York on----
        Mr. Kucinich. On a regular basis?
        Mr. Feldberg [continuing]. On a regular basis. I would not
    characterize it as our reporting to them. It is really a
    vehicle for us to exchange views and information and analysis.
    It's very much a two-way street.
        Mr. Kucinich. Isn't it true that Section 4.01 of the trust
    agreement calls for the trustees to provide the New York Fed
    with monthly custodial reports, quarterly summary of
    significant actions, quarterly report summarizing the efforts
    and activities to effect a sale or distribution of trust stock
    or other trust asset, minutes of any meeting, divestiture plan
    as amended time to time by the trustees? Isn't that true?
        Mr. Feldberg. Yes.
        Mr. Kucinich. So would it be fair to assume that the
    Federal Reserve Bank of New York has a significant role in
    monitoring the work of the trustees?
        Mr. Feldberg. Yeah. I would say that they have a
    significant interest in the work of the trustees.
        Mr. Kucinich. Are you trustees on behalf of the Federal
    Reserve Bank or are you trustees on behalf of the U.S.
    Treasury?
        Mr. Foshee. We're trustees on behalf of the trust that
    holds the 79 percent equity on behalf of the U.S. Treasury.
        Mr. Kucinich. And then can you explain to this committee
    then why do you respond to the Fed, why is this trust agreement
    structured so that your accountability is to the Fed?
        Ms. Considine. I don't think that's the reading that I
    would give to it, because No. 1, in terms of visibility of our
    responsibility, our responsibility is to act as the
    shareholder, and that is to vote the shares. Now when the
    annual meeting occurs of AIG, we will be voting for the
    directors, we'll vote the trust for the directors, we will vote
    for the auditors and we will vote for any other proposals that
    are coming before the shareholders. That will be absolutely
    open and public. As part of the agreement, yes, we are to
    provide minutes and of course expenses back to the Fed. But we
    were selected to be totally independent trustees, and I believe
    that's the way we function.
        Mr. Kucinich. Mr. Chairman, my time has expired. I'm going
    to need to ask questions along these lines if I may as a
    followup. Thank you, Mr. Chairman.
        Chairman Towns. I'd be delighted. Recognize the gentleman
    from California, Mr. Issa.
        Mr. Issa. I want to thank you all for being here and I want
    to thank you for your service. And I said to most of you, or
    two of you beforehand, this committee is not questioning your
    honesty and your effort to live under the trust agreement
    you've been given, which, Mr. Feldberg, you made very clear,
    you didn't draw it up. You know, this is sort of the job you
    got hired for, and the conditions of the job were already set.
        And I think it's important that the public understand that
    if there were mistakes made or if we are sending you in the
    wrong direction, it is not because you made that determination.
    And since your contract was signed, the trust was created on
    January 16th, then the previous president was still in place
    and the previous secretary of the treasury was still in place,
    so we'll accept for a moment that this is a two-administration
    decision.
        I'm going to go to Mr. Verret first. And specifically about
    the new administration, President Obama has said that he
    believes that we should actually have the Iraq and Afghan wars
    on the books. He thinks that should be part of the national
    debt. The various TARP injections and particularly the
    guarantees totally trillions of dollars, what would be the
    effect if we--should we put those onto the national debt since
    they are obligations of the Federal Government, and what would
    be the effect?
        Mr. Verret. Well, I can tell you the effect of when the
    United Kingdom took--bailed out its two largest banks, when it
    bailed out the Royal Bank of Scotland and Lloyd's. They put
    that $2.1 trillion of debt on those banks' private bank budget
    onto the national budget, and I think this was a consistent
    decision by Chancellor Darling that under the accounting rules,
    government accounting or private accounting, when you control
    an entity and you back up an entity, you're responsible for
    their debt, so you need to consolidate their debt onto your
    books.
        So when Chancellor Darling consolidated the debt of those
    two banks onto the U.K.'s national debt, the U.K.'s national
    debt doubled. It literally doubled overnight. And if we were to
    put Citigroup, for instance, debt onto the national debt, which
    I think would be appropriate, because we now own a controlling
    stake, a 36 percent controlling stake in Citigroup, which even
    under the Treasury Department's own regulations about reviewing
    foreign investments in the United States is defined
    specifically as control--they define it as control at 10
    percent. We've got 36 percent under Delaware corporate law,
    that's control. Under the securities laws, that's control. So
    we, I think, to be consistent should put Citigroup's national
    debt--Citigroup's private bank debt--onto our national debt.
    That would, I think, increase--by back-of-the-envelope
    calculation--it would increase our national debt by about 15
    percent, just Citigroup alone. Other TARP participants, the
    national debt would increase by significantly more. So right
    now it's effectively sort of a shadow national debt that we
    have unrecognized.
        Mr. Issa. OK. Well, I appreciate that and I may send a
    reminder to the President that he supported that. Ms.
    Considine, I'm going to ask you, but the others are free to
    answer, my understanding is that you represent, you three are
    for all practical purposes the stockholders for 79.9 percent of
    the company and you act as prudent stockholders should act in
    your day-to-day business. That's your charge, when we get past
    the legal contract. Is that right?
        Ms. Considine. Correct. That's correct.
        Mr. Issa. So regardless of whether it's the Treasury or the
    treasurer or whoever, do you believe that your job is to
    maximize the stockholder value on behalf of whoever the owner
    is?
        Ms. Considine. Absolutely. Absolutely.
        Mr. Issa. You're all saying yes?
        Mr. Foshee. Yes.
        Mr. Feldberg. Yes. I thought I made that clear in my
    opening----
        Mr. Issa. OK. And what's important to me to go down this
    road is, any--well, first of all, the New York Times has said
    that if they don't like what you're doing, the Fed will fire
    you. Do you believe you can be fired by the Fed even though
    you're maximizing the stockholder value?
        Mr. Feldberg. I think the Fed could remove us for cause,
    but only----
        Mr. Issa. OK. Well, let's go down that for a second. The
    Fed is sitting there with tens of billions of dollars that it's
    owed on the other side of the ledger, but if as stockholders
    you want to maximize stockholder value, wouldn't you consider
    doing through your board, through the operational, through Mr.
    Liddy, consider doing a lot of things that maximize value? For
    example, spinning off the healthy companies into new public
    companies in which you would have an 80 percent share, and that
    stock would trade unimpaired and immediately rise to its fair
    value, and determine that the debt that Treasury put on belongs
    to the corpus in London, not to the corporation that you're
    spinning off, and as a result, leave it where it would be. Now
    wouldn't that be a prudent thing for the board to do on behalf
    of this money that Mr. Liddy admitted was injected by the
    Treasury and given to other companies, including ones overseas,
    because of factors outside the best interest directly of the
    company? So as stockholders, are you free to do that? Can you
    do that even though, in fact, you probably would be increasing
    stockholder value here, and Treasury may not like it because
    they may have to admit that what they did was--well the term is
    urinate I guess--we don't say the other word anymore--a whole
    bunch of the taxpayers' dollars into foreign banks and other
    corporations that have slid right out of your company, one
    division of your company, which you did not have an obligation
    to pay, but if they gave you the money and you paid it out
    anyway? A complex question. Yes?
        Mr. Foshee. Congressman Issa, if I could answer that
    question, I think that you just articulated the primary reason
    that there is a trust, because the Treasury and the Federal
    Reserve Bank of New York couldn't be effectively lender----
        Mr. Issa. It couldn't be both fiduciaries.
        Mr. Foshee [continuing]. Lender, regulator and equity
    holder. And so the very thing that you're talking about, which
    is a lender wanting the company to take an act which is not in
    the best interests of the shareholders, especially to the
    extent that act required a shareholder vote, is exactly why the
    three of us are sitting here in front of you today, and our
    responsibility would be to act in the long-term best interest
    of the shareholders.
        Mr. Issa. OK. Ms. Considine, I'll let you all answer if the
    chairman will indulge me, but the other two parts of the
    question were, are those other acts which would maximize the
    value, which are available to you today at your disposal, and
    would all of those acts be outside what you could be fired for
    since they may very much leave this corpus with a negative
    balance while in fact maximizing stockholder value?
        Ms. Considine. They would be outside of what we would be
    fired for.
        Mr. Issa. So you could do that if it's determined to
    maximize the value for the company as stockholders, as--and
    working with your board?
        Ms. Considine. Well, I think there's two issues. No. 1, the
    cause for which we could be fired, and No. 2, what is the
    roles, responsibilities and limitations of the trust. And I
    think it's something that we'd have to think about, and as we
    said, this is unchartered waters, because we need to respect
    corporate governance, we need to respect the role of the board
    of directors, who are duly elected by the shareholders. But
    that's the balance that we have here. You've got the debt
    holders on one side, the equity holders on the other.
    Maximizing long-term value versus trying to get repaid for
    loans that have been made. And that's why I think this trust is
    such a unique instrument but is probably perfectly tailored to
    the situation in which we found ourselves.
        Mr. Issa. Yeah. And Mr. Verret wanted to answer briefly.
        Mr. Verret. I just want to briefly add just to cite Section
    2.04(d), if that's useful to the discussion. It says clearly
    here that in exercising their discretion with respect to the
    trust, the trustees are advised that it is the Federal Reserve
    Bank of New York's view that, ``the company being managed in a
    manner that would not disrupt financial market conditions is
    consistent with maximizing the value of the stock,'' even
    though maybe technically that might not be the case. So it
    seems like they are afforded the discretion, at least as I read
    the trust, to do things consistent with helping general market
    conditions even though it might not maximize the value of the
    stock.
        Mr. Feldberg. I believe that clause was put in by the
    Federal Reserve to express their desire that issue be
    considered in the course of the trustees' deliberations. It was
    explicitly done in a way that it does not direct the trustees
    to do anything.
        Mr. Issa. So none of you feel bound by that provision if in
    fact you have to choose between stockholder value and----
        Mr. Feldberg. No.
        Mr. Issa [continuing]. And, ``disruption of some market?''
        Mr. Foshee. We feel bound to consider that, but we don't
    feel bound to follow that, no.
        Mr. Issa. Thank you, Mr. Chairman.
        Chairman Towns. Thank you very much. Let me just take my
    round. First of all, let me thank you for being here.
        Mr. Feldberg. Yes.
        Mr. Foshee. Just to be clear, we're responsible for
    overseeing the equity held by the shareholders, the shares held
    by the trust.
        Chairman Towns. Right. I would like to provide a copy, let
    me put it this way, do you have a plan?
        Ms. Considine. I think you're probably discussing the plan,
    the disposition plan that we're responsible for putting
    together.
        Chairman Towns. Yes. Are you the project, are you involved
    in Project Destiny?
        Ms. Considine. Oh, no, no.
        Chairman Towns. You're not involved in that at all?
        Ms. Considine. We've looked at Project Destiny, we've
    discussed it with the senior staff at AIG, we've given some
    comments. We've seen it on the high level in terms of the plan.
        Chairman Towns. Right.
        Mr. Feldberg. If I might add, I think that plan is a good
    example of the intersections between management, the trustees
    and the Treasury and the Fed. The plan, which Mr. Liddy talked
    about earlier today, is AIG's plan. But in order to implement
    the plan, it will require a buy in by the Treasury and the
    Federal Reserve and, you know, could conceivably involve a
    change in, or an increase in the financing provided by the
    Treasury and the Federal Reserve to AIG.
        Chairman Towns. Let me ask you, go ahead.
        Mr. Feldberg. The role of the trustees in connection with
    that plan has been to provide our business judgment and
    experience in reviewing the plan and telling the Treasury and
    the Fed where we think the plan could be enhanced if we saw
    areas where that was possible, and in fact, we have given them
    positive input in a number of areas in connection with the
    analysis and review of the plan. But at the end of the day,
    it's AIG's plan and it will only go into effect if the Federal
    Reserve and the Treasury buy into it. At least, that's my
    understanding.
        Chairman Towns. Right. Let me ask you this, then. What is
    your view of Project Destiny? What do you think of it?
        Ms. Considine. Let me start off. I think it's a workable
    plan. There are issues that need to be addressed in terms of
    the timing of the plan. And also, the timing has to do with
    many of the risks that are out there in terms of the economy,
    the capital markets, and the ability to dispose of or get
    financing for the disposition of these assets.
        Mr. Foshee. Yes, I think based on what we've seen, Mr.
    Chairman, the plan makes sense. I think one of the challenges
    that AIG faces is, you don't want, in this kind of a market to
    go take these sort of crown jewel assets and sell them in a
    market where there aren't capital markets for buyers to pay
    full value. The other problem, of course, is that the AIG brand
    has been damaged and I think the company views, and we would
    concur, that taking the three, in particular, the three large
    insurance assets and making those separate public entities does
    a number of things. The first thing it does is, of course, get
    them out from under the negative halo of the AIG brand. It also
    re-energizes the employees of those companies because they now
    feel like they have a future with a brand new, very large
    public company at some point. And then, I think the third
    thing, as a practical matter, is to the extent there are
    entities out there that would want to acquire an insurance
    company or something like that. It creates a certain amount of
    valuation that is apparent by issuing it in the public market.
        Chairman Towns. All right.
        Ms. Considine. And I think, just to followup on that, that
    was one of the reasons that we, as trustees, sent the letter in
    terms of having a comprehensive compensation philosophy in
    place there. Because if you're going to be having different
    companies, you're going to need management out there, and they
    need the ability to attract and retain people to come in and be
    able to manage these and get them into the shape that they're
    going to be able to maximize the value when they're disposed
    of, either through sale or an IPO.
        Chairman Towns. AIG has received billions in tax dollars
    but continues to post losses with the largest in history--over
    $60 billion was posted just 2 months ago. What can we do to
    turn this around? Have you made suggestions or recommendations
    to them, or are you just, saying, look, that's the way it is
    and that's what's going to happen. What is your role in trying
    to turn this around? Or do you have a role in it?
        Mr. Foshee. Well, I think one of the things, one of the
    most prominent roles that I believe we can play as trustees, is
    ensuring that AIG has the best, most qualified, independent
    board of directors that it can have, overseeing the management
    team and ensuring that there's a management team there that is
    properly motivated and can execute the plan. So, I think in
    that, one of our primary tasks, we feel good about the
    successes we've had in being able to attract those kind of
    people to come be the board members of AIG. And it is that
    group, the board and the management team, that have the
    responsibility for directing this company and getting it
    through this mess. I think our input, I believe that it's
    valued by the company and by the Federal Reserve, to the extent
    we have conversations with them. And so, I do believe we're
    playing an active role in that.
        Chairman Towns. Do you have a plan that you submitted to
    AIG? I know you get together, you indicated that, but did you
    submit a plan as a group saying you think this is something
    that should happen or this is something that we should move
    forward and that maybe instead of 3 to 5 years, giving the
    taxpayers their money back, we can do it in a shorter period of
    time? Do you have a plan? Anything on paper that you can give
    us?
        Mr. Foshee. No. In fact, the trust doesn't charge us with
    creating a plan other than for the disposition, the ultimate
    disposition of the shares of AIG that we are entrusted to be
    stewards of. And we would expect, as we sit here today, that's
    probably years away in terms of maximizing the shareholder
    value.
        Ms. Considine. And we can't dispose of those shares until
    the loan that was extended by the Federal Reserve Bank of New
    York is repaid. Now, that doesn't mean we're going to wait
    until the ``repayment'' to come up with a plan. But, I think
    it's a little premature to be working on a plan for disposition
    of the shares that we hold at this time.
        Mr. Foshee. And it really isn't our role to create, nor
    could we, the three of us, this, one of the largest companies
    in the world, create our own plan for what AIG should do with
    its business. What we do do, though, is we talk to the
    company's management team, the company's outside advisors,
    their outside auditor, the head of internal audit, the Federal
    Reserve, and its outside advisors, and develop our own business
    judgments so that we can react to plans that are presented by
    the company.
        Chairman Towns. You know, I'm just thinking that, if you, a
    trustee of a company that has set a record in losses, it seems
    to me that you should have something to say. Should put
    something somewhere. I mean, if you're not, you should feel
    extremely guilty. You know, because the point of that, I mean,
    they've set a record, posted in the last 2 months, in terms of
    their losses, and so, I mean, seem to be that based on your
    background and you're being involved in business and, of
    course, that you should be able to say to them, we need to move
    in a different direction, let's try this. I mean, I would like
    to see something on paper that you've given them as a
    suggestion, a recommendation, knowing that it's not your final
    decision, but my God, I mean, this kind of loss, somebody ought
    to say something and somebody ought to do something.
        Mr. Foshee. Yeah, well, I'm sorry, go ahead.
        Mr. Feldberg. As I think has been said, there is a plan. In
    the first instance, it was put forth by AIG. It's a massive
    document. I mean, the number of man-hours that have gone into
    its preparation----
        Chairman Towns. Are you referring to Project Destiny?
        Mr. Foshee. Yes.
        Mr. Feldberg. I'm referring to Project Destiny. And that
    plan has been submitted to the Federal Reserve and the Treasury
    for their review and buy in. And the role we have played is to
    have access to the plan and an opportunity to provide our
    input. And we have done that informally in discussions with AIG
    and the Federal Reserve and the Treasury. And those discussions
    are ongoing.
        Chairman Towns. So, there's no input in writing. You
    haven't written anything down.
        Mr. Feldberg. Mr. Chairman, at the moment, we are basically
    a staff of three, the three trustees. We have opted not to hire
    our own analytical resources, not to engage outside
    consultants, investment bankers, or whatever to assist us.
    There may be a point in the future where we will decide to do
    that and certainly when we get to the point of having to come
    up with a plan for the disposition of the stock, we will do
    that. But at this point, we have a law firm advising us to make
    sure that we comply with all the legal requirements of the
    trust and anything else that's relevant. And we've got somebody
    to help us deal with the press, but that basically is it and
    there are the three of us. And what we are trying to do, is
    provide from the top down, our business judgment and experience
    in reviewing the plans that have been prepared.
        Ms. Considine. I think in this case leverage is good. We
    are trying to leverage the board, the management, the outside
    firms that they are using, be they investment banks, auditors,
    internal auditors and all the resources, and bringing that
    together and then coming in and offer, based on our collective
    business judgment, feedback and comments.
        Mr. Foshee. I think our business judgment is that, frankly,
    the last thing AIG needs now is another set of outside
    advisors. The company has internal staff, it has external
    advisors, the Federal Reserve Bank has internal staff, it has
    outside advisors. We've chosen, rather than to spend the
    taxpayers' dollars on another set of investment bankers at this
    point, not to do that and leverage what already exists. But we
    have a, I think, we have had a significant amount of input into
    the direction of the company and I would say, not only are we
    not embarrassed, we're proud that from a standing start at the
    beginning of March, we're able to announce to you today that
    we've put forward five really capable, really independent
    directors that we expect to be elected at the shareholders'
    meeting now close to a month away. Because we know, if AIG has
    the best board it can get, and that board is directing the best
    management team it could get, therefore, you're going to end up
    with the best outcome you can have for the U.S. taxpayer.
        Chairman Towns. Thank you very much. I yield to Congressman
    Tierney from Massachusetts.
        Mr. Tierney. Thank you, Mr. Chairman. Do your minutes
    reflect conversations you've had amongst yourselves about
    Project Destiny?
        Mr. Foshee. To the extent it was during a trustee meeting,
    I think the answer to that would be yes, though I haven't gone
    back and reviewed all of those.
        Mr. Tierney. Are you having conversations amongst
    yourselves about Project Destiny on occasions when you would
    not term it a trustee meeting?
        Ms. Considine. I think we've had the conversations on
    Project Destiny when it's been with the AIG management, with
    AIG management and the Fed, and AIG management, the Fed and
    Treasury.
        Mr. Tierney. Do your minutes reflect those conversations
    and dialog with those individuals?
        Ms. Considine. Well, they wouldn't be the minutes of the
    trustees. They would have been the group conversation.
        Mr. Tierney. Well, but there is no record, in other words,
    of the trustees, of dialog that they've had with third parties
    on the issue of Project Destiny?
        Ms. Considine. Project Destiny.
        Mr. Tierney. You don't go back and make a report or keep
    any record of what conversations you had or whatever?
        Mr. Foshee. Probably not.
        Ms. Considine. These are real working sessions.
        Mr. Tierney. What is the value of the stocks that you hold
    right now?
        Ms. Considine. Well, if you----
        Mr. Tierney. Best estimate.
        Mr. Foshee. I don't think a reasonable person could tell
    you the answer to that question, given the nature of the
    complexities that are in front of AIG. I think it is our
    business judgment that the plan that's been put forth offers up
    a very credible, very rational way for the U.S. taxpayer to get
    its money back.
        Mr. Tierney. You wouldn't just take the number of shares
    you have and multiply by the dollar per share cost of what's on
    the market?
        Ms. Considine. Well, I mean, that's what I was going to
    say. If you want to say 80 percent of what the share price,
    between $5 and $6 billion, so it's $4.8 billion. I mean, if
    you're looking for, whether that's real.
        Mr. Foshee. Whether that's the long term value of those
    shares is another question.
        Ms. Considine. That's present value.
        Mr. Tierney. Now, there's conversation that this Project
    Destiny really looks like a way of selling off bad assets, of
    restructuring and selling profitable units, in an attempt to
    wind down the company. There are some people that believe
    that's what's going on here. And, is that your impression, and
    if it is, aren't we just looking at bankruptcy by another name?
        Ms. Considine. Well, I would say that it's looking to sell
    off good assets. And there are some very, very valuable assets
    within the AIG umbrella: the insurance assets. And I believe,
    as Mr. Liddy talked about, ALICO, AIU, and AIA are three of,
    sort of, the gems that are being looked at. Part of the plan is
    to, you know, continue the wind down of the financial products
    division. So, I think what you'd be left with would be a much
    smaller AIG, reconstituted, which would probably be, in some
    respects, almost an investment company that would be holding
    the shares in these other companies until they were finally
    disposed of, whether a total sale, an IPO, or if only portions
    of it were sold.
        Mr. Tierney. Couldn't we have kept $185 billion in the
    Treasury and just gone right to that by having a bankruptcy
    proceeding at the very outset of this?
        Mr. Feldberg. You probably could have, but that gets into
    the question of systemic risk and what would the implications
    of that have been, more broadly.
        Ms. Considine. You know, I was just on another panel last
    night and when you think back on what was going on that weekend
    of September 13th, this fall, where you had Merrill Lynch and
    you had Lehman Brothers and then, you know, within 24 hours,
    you had an end issue with AIG, I think the impact would have
    been beyond what we could even imagine, even after what we've
    all seen. So, I think, you know, maybe 20 years from now,
    academics can look at it and really have some time and some
    distance. But I think acting within that 48 hour time span,
    what was done was probably the thing that had to be done, given
    the systemic consequences that were out there.
        Mr. Tierney. You're familiar with the Black Rock contract
    with the Fed?
        Ms. Considine. Not familiar with it, but aware of it, yeah.
        Mr. Tierney. I'm sorry?
        Mr. Feldberg. We're aware of it.
        Ms. Considine. We're aware of it.
        Mr. Tierney. Does that impact your role at all? I mean,
    that they've actually been, sort of, charged with the oversight
    and monitoring of what's been, what's going on within the
    company for a bit. Does that, the impact, are you getting in
    touch with them at all and sharing notes, or----
        Mr. Foshee. We have not had conversations either with Black
    Rock or, I believe, Black Stone, who is also an advisory to the
    company or to the Fed. I think our view is that so far as we
    know, those are good things, not bad things, because as
    everyone knows, the financial products group in particular, has
    been under a tremendous amount of stress, still represents a
    tremendous amount of exposure to the company and having another
    set of eyes in there to assist, we would view, on its face, as
    a good thing from the perspective of protecting the taxpayers'
    interest.
        Chairman Towns. Will the gentleman yield at this time? We
    have a vote on and I'd like to move to Congresswoman Marcy
    Kaptur and then we will be able to conclude. Congresswoman
    Kaptur.
        Ms. Kaptur. Thank you, Mr. Chairman. Mr. Foshee, who is El
    Paso Corp.'s chief banker?
        Mr. Foshee. El Paso Corp.'s chief banker, we have
    relationships with half a dozen of the top, of the largest
    financial institutions in the world.
        Ms. Kaptur. And they would be?
        Mr. Foshee. Bank of America, J.P. Morgan, Deutsche Bank,
    Goldman Sachs, I'm going to get in trouble for leaving one out,
    by them. Royal Bank of Scotland, a whole litany of banks around
    the world that are service providers to El Paso.
        Ms. Kaptur. Many and also many of which, most of which,
    have gotten counter-party funds through the AIG transactions
    through the Fed. You would agree to that?
        Mr. Foshee. You know, again, specifically, I'm sure that
    many of them did, because we do business with many of the banks
    around the world.
        Ms. Kaptur. Well, J.P. Morgan Chase got $1.6 billion, Bank
    of American got $12 billion, Citigroup got $2.3 billion.
    Interesting to look down the list. Let me ask you, when you
    served as CEO of Halliburton, were you a party to the no-bid
    contracts that were initiated at the beginning of the Iraq war
    for the oil security in Iraq?
        Mr. Foshee. First of all, I was never CEO of Halliburton. I
    worked for Halliburton for 24 months. I was hired on the heels
    of the asbestos crisis as a Chief Financial Officer in what
    would have been characterized as a turnaround mode when the
    stock went from $56 to $6. Of the 24 months I was there, I
    spent most of that time as the Chief Financial Officer, so I
    would not have had a role in that.
        Ms. Kaptur. All right, this says chief operating officer,
    executive vice president, so.
        Mr. Foshee. And the last 6, yes, and the last 6 months I
    was with the company, I was the Chief Operating Officer.
        Ms. Kaptur. All right. Through what years? Through 2003?
        Mr. Foshee. That would have been, I believe I left in early
    to middle 2003. So the last 6 months prior to that.
        Ms. Kaptur. All right. So, you would have been there at the
    beginning of the Iraq war?
        Mr. Foshee. Yes.
        Ms. Kaptur. All right. Thank you very much. Mr. Feldberg
    and Ms. Considine, when people wish to write you, in your
    position as trustees, which address do they write you?
        Ms. Considine. 399 Park Avenue, New York, NY, and the Zip
    is 10022.
        Ms. Kaptur. All right. And how do they address that?
        Ms. Considine. Care of Arnold and Porter. We have a trust
    office at Arnold and Porter at 399 Park.
        Ms. Kaptur. All right. Mr. Feldberg, through 2008, you were
    chairman of Barclays America, is that right?
        Mr. Feldberg. Yes.
        Ms. Kaptur. OK, do you own stock in that bank?
        Mr. Feldberg. Yes, I do.
        Ms. Kaptur. You do? What is the relationship between that
    and Barclay Capital, that was in receipt of $8.5 billion
    through the AIG counter-party arrangement with the Fed?
        Mr. Feldberg. Barclays Capital is a business unit of
    Barclays Bank and----
        Ms. Kaptur. So, they are related.
        Mr. Feldberg. They are related, yes.
        Ms. Kaptur. All right. And when you worked at the Fed, what
    did you do? You were a senior official. What did you do?
        Mr. Feldberg. Well, I did a number of different things,
    but----
        Ms. Kaptur. What was your title?
        Mr. Feldberg. Executive vice president at the time I
    retired.
        Ms. Kaptur. All right.
        Mr. Feldberg. I spent about 10 years running the discount
    window, the Fed's lending operation. And the last 9 years I was
    there, I was executive vice president, responsible for bank
    supervision.
        Ms. Kaptur. Thank you. And where is Barclays that you
    worked for, headquartered in our country? Where is it?
        Mr. Feldberg. In New York City.
        Ms. Kaptur. And what street?
        Mr. Feldberg. Well, it's moved, but at the time, it was
    200, well, when I left it was 200 Park Avenue.
        Ms. Kaptur. Park Avenue. So, you're close neighbors there.
    And Ms. Considine, I wanted to ask you, Butterfield Fulcrum,
    it's a hedge fund management industry. Who are your major
    clients?
        Ms. Considine. Mainly hedge funds, such as, well, very
    small ones, they wouldn't be on your radar screen, I mean.
        Ms. Kaptur. Could you provide those for the record, please?
    Just pick one. Pick two. Pick three. You must know who your
    clients are.
        Ms. Considine. Yes, I am. The thing is, we are a private
    company and we usually don't come out with our clients' names,
    so I would just have to check with it. The other thing is, it
    is not a U.S. company, so I would just like to go and get
    clearance on that.
        Ms. Kaptur. Uh, Butterfield Fulcrum?
        Ms. Considine. Butterfield Fulcrum.
        Ms. Kaptur. It is based in what country, then?
        Ms. Considine. It's a Bermuda company. It was founded 20
    years ago in Bermuda. It was bought out about 2 years ago by a
    UK company and then in the past year, we merged with the arm of
    Butterfield Bank, which is a 150 year old Bermuda bank. So,
    it's a global company. It is incorporated in Bermuda. Its
    senior management is located in the UK.
        Ms. Kaptur. All right. I thank you for stating that. Mr.
    Chairman, my time is expired.
        Chairman Towns. Thank you. We have a vote on, so, we have
    three votes on, so I'd hope we'd be able to make it----
        Ms. Kaptur. Mr. Chairman, Mr. Chairman, may I just say, you
    know, as I've listened today, I get more and more concerned
    when I represent a part of our country that is being devastated
    by what these New York institutions and New York headquarters
    institutions have done to America and have done to places like
    I represent. You have no conceivable idea of the damage you
    have done and are doing. I could go into a lot of detail here
    and I know Mr. Chairman will have followup hearings. The way
    this whole thing is structured, it's an inside deal from the
    beginning. Every single witness we've had is headquartered in
    one place. You all know one another, you work together all the
    time and I'll tell you, what you've done to middle America is a
    sacrilege. Thank you, Mr. Chairman.
        Mr. Foshee. For the record, I'm from Texas. Our
    headquarters are in Texas.
        Ms. Kaptur. Oh, but your bankers aren't. They follow right
    up the street.
        Chairman Towns. Let me, you know, it's not clear, to me and
    other Members here exactly what you do, in terms of the role
    that you're playing in this. So, if you'll be kind enough to
    submit to the committee, some minutes of your meetings, so that
    we can get a feel for what you're doing, because it's not clear
    to us up here. And we've been sort of like, whispering to
    ourselves and passing notes, you know, to ourselves, about your
    real role.
        And so, if you could help us with that, well, I'll hold the
    record open for some minutes to get a feel for what you're
    doing and maybe we'll understand, why you're doing that.
        Thank you so much. We appreciate you coming today.
        [Whereupon, at approximately 2 p.m., the committee was
    adjourned.]
        [The prepared statement of Hon. Gerald E. Connolly and
    additional information submitted for the hearing record
    follow:]

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