UPDATE 4:25PM EDT: Rep. Elijah Cummings of Maryland, the ranking Democrat on the House Oversight and Government Reform Committee, called on AIG CEO Robert Benmosche to resign Tuesday afternoon over his comments about the lynching of black people. "As the leading critic of AIG’s lavish spending before and after its taxpayer funded bailout—and as the son of sharecroppers who actually experienced lynchings in their communities—I find it unbelievably appalling that Mr. Benmosche equates the violent repression of the African American people with congressional efforts to prevent the waste of taxpayer dollars," Cummings said in a statement. "If these statements are true, I believe he has demonstrated a fundamental inability to lead this modern global company in a responsible manner—a company that exists today only because it was rescued by the American taxpayers—and that he should resign his position as CEO immediately.”
American International Group (NYSE:AIG), the insurance giant at the heart of the financial crisis five years ago, sparked an uproar in 2009 when, after receiving over $170 billion in bailout funds, it announced it would give out $450 million in bonuses. Worse, $165 million would go to the same financial products unit that would have destroyed AIG in the first place had the federal government not bailed the company out.
But five years later, AIG CEO Robert Benmosche believes that the outcry against the bonuses was outrageous. It was just as bad, he told the Wall Street Journal last week, as a southern lynch mob.
The uproar over bonuses “was intended to stir public anger, to get everybody out there with their pitch forks and their hangman nooses, and all that -- sort of like what we did in the Deep South [decades ago]. And I think it was just as bad and just as wrong."
As Columbia Journalism Review noted, the Wall Street Journal first published its interview with Benmosche last week but this quote didn’t surface until a follow-up post on the paper’s Money Beat blog Monday afternoon.
In the interview, Benmosche defends the bonuses as necessary to retaining talented executives, and laid the blame for AIG’s role in the crisis -- insuring worthless mortgage-backed securities -- on just a handful of people in the unit.
“[The outcry] was ignorance … of the public at large, the government and other constituencies. I’ll tell you why. [Critics referred] to bonuses as above and beyond [basic compensation]. In financial markets that’s not the case. … It is core compensation.
“Now you have these bright young people [in the financial-products unit] who had nothing to do with [the bad bets that hurt the company.] … They understand the derivatives very well; they understand the complexity. … They’re all scared. They [had made] good livings. They probably lived beyond their means. …They aren’t going to stay there for nothing.
The uproar over bonuses “was intended to stir public anger, to get everybody out there with their pitch forks and their hangman nooses, and all that–sort of like what we did in the Deep South [decades ago]. And I think it was just as bad and just as wrong.
“We wouldn’t be here today had they not stayed and accepted … dramatically reduced pay. … They really contributed an enormous amount [to AIG’s survival] and proved to the world they are good people. It is a shame we put them through that.”