American International Group president and CEO Robert Benmosche is under heavy fire from a senior Maryland Democratic congressman after comparing the intense criticism of bonus payments made in 2009 to AIG Financial Products executives to the lynching of blacks during the civil rights battles of several decades ago.

Benmosche has an apology for the remarks: “It was a poor choice of words. I never meant to offend anyone by it,” Benmosche said through a spokesman in response to a call for his resignation by Rep. Elijah E. Cummings, ranking member of the House Committee on Oversight and Government Reform.

In an interview with the Wall Street Journal marking the 5-year anniversary of the government bailout of AIG, Benmosche strongly criticized the intense public response to the disclosure that the government had approved the payout of $165 million in contractual retention payments to AIGFP officials.

Benmosche said the uproar “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.”

Cummings, who lead the congressional probe into the payments, said in a statement, “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.”

“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,” Cummings added.

Benmosche told the Wall Street Journal there were “less than ten” AIG employees who were responsible for the bad trades that led to huge losses and a federal rescue of the company in 2008. Most of the employees who were receiving bonuses would have left the company had the bonuses been slashed, he said.

“We wouldn't be here today had they not stayed and accepted … dramatically reduced pay,” he said in the interview. “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.”

To prevent its collapse, AIG ultimately received approximately $182 billion in aid from the government, but paid it back through profits and sales of securities. The government sold the last part of its stake in AIG at the end of 2012.

Criticism arose over payment of $165 million in bonuses in the spring of 2009 to AIGFP employees, based in London. Most of the problems at AIG stemmed from the unit's purchases of speculative mortgage-backed securities collateralized by the reserves of AIG's life subsidiaries, and through sale of credit default swaps that guaranteed, at its peak, $2.77 billion worth of securities backed by mortgages of various grades acquired by various banks and other institutions.

AIG's need to provide collateral on the CDS to the counterparties was what triggered the immediate need for a federal bailout.

A newly-elected President Barack Obama asked Treasury Secretary Timothy Geithner to stop AIG from paying the bonuses to financial products unit employees, but the company's management said it was “contractually obligated” to pay the previously negotiated bonuses.

The Special Inspector General for the Troubled Asset Relief Program (SIGTARP) has heaped strong and continuing criticism of the bonuses on the government as well as AIG since they came to light.

Special Reports /

AIG's Benmosche Under Fire After Comparing Bonus Criticism to Lynchings

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