WASHINGTON – The head of financially strapped AIG is telling Congress he's heard the rage over executive bonuses and has called on employees to voluntarily return at least half of the money.

Testifying under oath at a congressional hearing as intense as any in recent memory, Edward Liddy said that some workers there already have stepped forward to give money back.

Liddy, who is chairman and chief executive officer of AIG, told a House subcommittee that the bonuses could be defended legally as a legal obligation of the company. But he also said that given the national uproar, he asked those who got "retention payments" over $100,000 to return at least half of it.

The chief executive officer of the failed insurance conglomerate acknowledged Wednesday that the company's multimillion-dollar bonuses were "distasteful" to many and had provoked a firestorm of wrath. "I share that anger," Edward Liddy, chairman and CEO of the American International Group Inc., said in testimony prepared for Congress.

Meanwhile, President Barack Obama said today that no one in his administration created the AIG situation but that the "buck stops with me" to fix it.

Lawmakers from both parties expressed fury over the company's behavior. For the American public, AIG now stands for "arrogance, incompetence and greed," said Rep. Paul Hodes, D-N.H.

Liddy, in his written remarks, said, "Mistakes were made at AIG on a scale few could have every imagined possible."

But, he also said that the roughly $165 million in bonuses paid out over the weekend should be honored as a legal commitment of the United States government, which now owns 80 percent of the battered insurer.

"When you owe someone money, you pay that money back," Liddy maintained. "We at AIG want to believe that we are all in this together," said the man named six months ago to take over the company as part of the government rescue. Some $170 billion in tax money has now been pledged to AIG.

Meanwhile, the agency that oversees AIG said that, while its criticism of the company's practices had sharpened over the past five years, it failed to recognize the extent of risk posed by the exotic financial instruments the insurance company offered, many of them tied to a housing market that had long been rising.

Scott Polakoff, acting director of the Office of Thrift Supervision, said regulators failed to accurately predict what would happen to AIG's so-called credit default swaps — a form of insurance — if housing values collapsed, as they have. "There are a lot of people walking around who failed to understand how bad the real estate market had gotten," he said.

Liddy's stance that the bonuses should be honored, no matter how distasteful, drew sharp comments from both parties.

It is "time for us to assert our ownership rights," said Rep. Barney Frank, D-Mass., chairman of the full Financial Services committee. Frank said Congress will be asking for the names of the bonus recipients — and if AIG declines to provide it, he will convene the committee to subpoena for the names. "We do intend to use our power to get the names," he said.

Rep. Scott Garrett of New Jersey, the senior Republican on the subcommittee, complained that the administration still has no exit strategy for disentangling itself from the insurance giant.

"Part of me wants to say to some of the loudest critics, `What did you expect and why weren't you asking more questions before?' I would argue that the real outrage now is the $170 billion of taxpayer moneys that's been pumped into this company and to what effect," he said.

Rep. Gary Ackerman, D-N.Y., cited a "tidal wave of rage" throughout America right now.

AIG is under fire for $220 million in retention bonuses paid to employees in its troubled financial products division. The most recent payment of $165 million began to be paid last Friday and caused a furor.

The retention payments — ranging from $1,000 to nearly $6.5 million — were put together in early 2008, long before then-Treasury Secretary Henry Paulson asked Liddy to take over the company. Liddy himself is not getting a bonus and is only drawing $1 a year in salary.

Liddy also said in his prepared testimony that AIG grew into an internal hedge fund that became overexposed to market risks. AIG is the largest recipient of federal government emergency assistance.

"No one knows better than I that AIG has been the recipient of generous amounts of governmental financial aid. We have been the beneficiary of the American people's forbearance and patience," he said. But he also said that "we have to continue managing our business as a business — taking account of the cold realities of competition for customers, for revenues and for employees."

The clamor over compensation overshadowed AIG's weekend disclosure that it used more than $90 billion in federal aid to pay out to foreign and domestic banks, including some that had multibillion-dollar U.S. government bailouts of their own. AIG is the single largest recipient of government assistance — a company whose financial transactions were so intricate and intertwined that it was considered simply too big to fail.

Orice Williams, director of financial markets and community investment at the Government Accountability Office, the government's top watchdog agency, told the panel that the government's intervention helped AIG avoid failure, but that the company is still struggling to pay back the money.

Market and other conditions have prevented the insurer from making significant asset sales, she testified. She said most restructuring efforts are still under way.

Liddy said the company's new management team found its overall structure "too complex, too unwieldy and too opaque for its component businesses to be well managed as one company."

He said the new managers have "addressed our liquidity crisis and stabilized the company's cash position" and is winding down the financial products side of the business.

The White House and Treasury Secretary Timothy Geithner, both of whom have condemned the bonus payments, have been pounded by questions about why they did not know about the bonus payments sooner.

The White House for the first time on Tuesday night said Geithner learned of the impending bonus payments a week ago Tuesday; he told the White House about them last Thursday, and senior aides informed President Barack Obama later that day.

Geithner said on Tuesday he was working with the Justice Department to find ways to recover some of the payments. He cited a provision in the recent economic stimulus law that gave him authority to review compensation to the most highly paid employees of companies that already have received federal assistance.

The rage is being heard. I know I sent mails to Geithner and Congress.

Kat

if you really want to be enraged do some research on where the bailout money to AIG has gone

I heard, expensive golf tournaments, 4 star hotels, and free flights to the shows for the attaining celebrity CEOs.

I know that too. Not to mention the protitutes. They are shameful and should be dealt with.

Kat

Well. someone said putting money out to consumers to spend would bolster the economy. Those CEO's, consumers, did what they were advised to do, stimulate the economy.

I wonder how many more Banks, Lenders, etc. did the same thing?

im not talking about that stuff. im talking about billions to overseas banks and billions to banks here bank of america and merril lynch to name a few. money given to AIG and sent away to other places when people werent looking

wow

people need to wake up. our country is being robbed and its both parties doing it.

Understood.
In my whole life, I've never been witness to so many changes happening so fast.
Actually, I can't step back far enough to see, much less imagine, where we are headed.
And what are the solutions? What say do we have? What changes can we, the Common people make to set them straight?
We are just forced to hang on for the ride and enjoy the show.

i hate to say it but your right

The US is not being robbed.
The US is giving its money away, but on the positive side they now own AIG (80% owners).

They did forget to do the basic math, 80% of nothing is nothing.

Yes, I knew that too. I listened to that on some news thing. Or commentary.

Kat

the boss has the tv on to the news all day. so i get an earful lol

sad thing is the small businesses like where i work....struggle but are honest....while AIG takes money and pockets it. they will be dealt with.

We the people are supposed to run the government. At least that's what our founding fathers had in mind.

but we the people elected those in office...all offices