Tags: Benmosche | bonus | lynching | AIG

AIG's Benmosche: Bonus Outrage Like Southern Lynchings

Friday, 27 Sep 2013 08:33 AM

By Michelle Smith

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Outrage over AIG employee bonuses is akin to lynchings in the South, CEO Robert Benmosche, explains to The Wall Street Journal.

In 2008, the deeply distressed AIG was on the brink of demise. Considered "too big to fail," the company received a hefty government bailout of over $180 billion.

Benmosche still cannot grasp the government's campaign against its decision to pay bonuses or the public's outrage.

Editor’s Note:
Seniors Scoop Up Unclaimed $20,500 Checks? (See If You Qualify)

It was mass "ignorance," he tells The Journal. Critics view bonuses as a type of extra compensation, but "in financial markets that's not the case. ... It is core compensation," he explains.

"Less than 10" employees were behind the bad trades" on toxic mortgage bonds, but AIG's financial products unit consisted of hundred of "bright young people" who had nothing to do with that. Benmosche said they were scared, probably living beyond their means and would not stay for nothing.

Outrage over the 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," Benmosche tells The Journal.

He claims the company survived because those AIG workers stayed, "with dramatically reduced pay" and "proved to the world they are good people."

"It's a shame what we put them through" he said.

The public wants a villain to blame for the financial crisis, but there isn't just one. "Everybody" is a villain in this story, Benmosche contends. That includes the people who lied on mortgage applications, the real estate speculators, and " I include myself in there. I knew stuff was wrong," he admits.

This isn't the first time the AIG chief used a lynching reference in defense of bonuses, according to MarketWatch notes.

In 2009, then-New York Attorney General Andrew Cuomo revealed over 70 employees received bonuses upward of $1 million.

"(He) doesn't deserve to be in government, and he surely shouldn't be the attorney general of the state of New York. What he did is criminal. You don't create lynch mobs to go out to people's homes and do the things he did," Benmosche said at the time.

He reportedly apologized for those comments. And following media reports about last week's interview, he released a statement saying, "It was a poor choice of words. I never meant to offend anyone by it."

Benmosche previously said he'll likely retire during the first quarter of 2015, because he's "having a lot of fun" and "making a lot of progress" at AIG.

But Rep. Elijah Cummings, D-Md., released a statement calling for Benmosche to resign now.

Cummings said he is "a leading critic of AIG's lavish spending" and "the son of sharecroppers who 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," the Maryland Rep said.

"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."

Editor’s Note: Seniors Scoop Up Unclaimed $20,500 Checks? (See If You Qualify)

Related Stories:

Wall Street Bonuses, Staff Levels to Rise in 2013, Consultant Predicts

WSJ: Fed Convinces Financial Firms to Cut Back on Executive Bonuses

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