By Tom Braithwaite in New York and Gina Chon in Washington
Robert Benmosche, chief executive of AIG, was condemned by regulators and politicians for claiming criticism of bonuses at the bailed-out insurer was “just as bad” as racist murders in the Deep South.
Elijah Cummings, the top Democrat on the House oversight committee, called on Mr Benmosche to resign, saying he had demonstrated a “fundamental inability to lead” the company.
“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,” Mr Cummings said in a statement.
Ben Lawsky, the superintendent of financial services in New York, Jeff Merkely, a Democratic senator, and Barney Frank, former chairman of the House financial services committee, also criticised Mr Benmosche’s remarks.
The revelation that AIG staff would continue to receive $165m in bonuses even after a government bailout started a political storm in 2009.
Mr Benmosche told the Wall Street Journal that the uproar over bonuses “was intended to stir public anger, to get everybody out there with their pitchforks 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.”
Thousands of black people were killed in the US between the 1880s and 1960s in a terror campaign fought in the name of white supremacy.
After his comments began to draw criticism on Tuesday, Mr Benmosche said: “It was a poor choice of words. I never meant to offend anyone by it.”
Mr Frank said: “Comparing people who were criticised to people who were killed is bizarre.” Accusing Mr Benmosche of “gross stupidity”, he added: “The fact is AIG was the recipient of extraordinary help from the federal government and I believe the bonuses were not only excessive but hard to explain given the people who got the bonuses were the people who were there when they screwed up so badly.”
The AIG bonuses issue became heated, with employees receiving abuse outside their homes and death threats. Tim Geithner, then US Treasury secretary, faced calls to resign for allowing the payments.
President Barack Obama said the bonuses were a symptom of the culture of “excess greed” that had spawned the crisis and warned Wall Street that there could be no return to “business as usual”.
Congress threatened to tax them and the company later persuaded many of the recipients to repay them.
Mr Frank said there had been “some overheated rhetoric” and said he himself had pulled back from a demand for the names of the bonus recipients after receiving credible information that their safety was at risk.
“There was some overheated rhetoric,” he said. “But to compare wealthy people who got large bonuses because of their work which had ultimately resulted in a financial meltdown to people who were murdered is a grosser stupidity [than I had imagined possible]”.
He added it “reflects what I’ve seen from some of the AIG people of their bewildering notion that the federal government did only what they deserved. In fact, by the law that’s now in place they would not be as lucky: AIG would have been dissolved”.
Mr Lawsky, the regulator for financial services in New York, who famously fined Standard Chartered for anti-money laundering offences, said: “We thought it was a totally inappropriate comparison and an outrageous thing to say. He says apparently that it was a poor choice of words. I think that’s certainly an understatement and we thought it would be appropriate for AIG to at least indicate that it wasn’t the company’s views.”
The AIG boss is not the first to use a controversial analogy for his company’s struggles in Washington. Stephen Schwarzman, the chairman of Blackstone, in 2008 told board members of a non-profit organisation that the Obama administration’s efforts to increase taxes on private equity groups was “like when Hitler invaded Poland in 1939”. He later apologised.
Over the past two years, the insurer has paid back the taxpayer funds extended to it during the crisis. Mr Benmosche joined the company after the bailout.