[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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              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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