In the aftermath of the financial crisis, American International Group was bailed out by the federal government. But evidently, that truth hasn't stopped their current CEO from arguing that the company should be allowed to regulate itself.
This week, when asked by CNN's Poppy Harlow for his opinion on financial reform, AIG CEO Robert Benmosche made his views clear. "Right now, the most important thing is that we've got to get companies to regulate themselves and to do the right thing," he told CNN viewers. The regulator's job, he continued, is "to figure out how to improve that system."
In 2008, AIG required a $180 billion bailout package in order to stay afloat after the company teetered close to collapse, according to CNN. Prior to the collapse, the company had insured $441 billion worth of mortgage-backed securities for Wall Street banks in the form of credit default swaps, reports Bloomberg. When the system imploded, AIG became the big insurer that couldn't keep up.
Still, in the CNN interview, Benmosche defended investment banks, saying the practices employed were not criminal, simply the result of bad management.
"It could be just sloppy underwriting, it could be sloppy business," Benmosche said. "And that's just not illegal, unless you portray something one way and you knew it wasn't."
Before the financial crisis, self-regulation was the mantra of many on Wall Street, reports The New York Times. Former Federal Reserve Alan Greenspan, who during his tenure as Federal Reserve chair was a big proponent of the self-regulating philosophy, has since admitted that this philosophy was flawed. “Yes, I’ve found a flaw [with self-regulation]," he told lawmakers in October 2008. "I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”
Benmosche's call for self-regulation stands in contrast to stark criticism of the firm's actions in the wake of its bailout. In 2009, AIG faced criticism for paying more than $165 million in bonuses to executives in charge when the firm was brought to the brink of disaster.
Later that year, in a letter written by Representative Joe Courtney (D-CT) and co-signed by 78 other members of the House of Representatives, the Congressman was especially critical of AIG, according to Bloomberg.
“This company, more than any other single entity, is responsible for the crash of world credit markets,” he wrote. “AIG has shamelessly lined up for a $170 billion handout only to be used to cover up its own incompetence and irresponsible business practices.”
Benmosche, since taking over the firm in 2009, has had a bit of a rocky public profile, CNN reported in 2009. He reportedly told AIG employees that if Congress requested he testify before them, he would reply that they should "stick it where the sun don't shine." He also reportedly threatened to resign over government pay restrictions.
Watch the full interview here:
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