Is a public upset about big bonuses at bailed-out Wall Street firms akin to a lynch mob? The CEO of the insurance giant AIG thinks so. In an interview with the Wall Street Journal, Benmosche talks about the outrage that erupted in March 2009, when AIG—which had just received a $170 billion bailout—announced it would pay up to $450 million to employees in the financial products unit that brought the company to the brink of collapse.
Here's what Benmosche said:
"That 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 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 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 pitchforks and their hangman nooses, and all that–sort of like what we did in the Deep South. 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."
Interestingly, the main interview with Benmosche ran in the Journal Friday, but as the Columbia Journalism Review notes, this particular clip only showed up on the website's MoneyBeat blog two days later.