AIG's Benmosche Runs Out of Ammunition

(Updated with Frenkel retirement news.)

NEW YORK (TheStreet) -- Just when you thought the AIG(AIG Quote) farce couldn't get any better (or worse), the hapless insurer surprises us again.

Not only is AIG's stock dangerously overpriced, but ratings company Moody's thinks the insurer may potentially repay a substantial part of its bailout, which stands at more than $100 billion. And today, the Wall Street Journal reports that Chief Executive Officer Robert Benmosche told the board he's considering resigning. On the heels of that report, AIG said Jacob Frenkel, vice chairman of global economic strategies, will retire after five years with the company.

If Benmosche thought such a threat would gain him support, he may have misjudged the nation's mood, if not the board's. Most Americans would say "don't let the door hit you on the way out" after saving massively profitable institutions from self-destruction while at the same time watching their own net worth plummet.

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Benmosche would be advised to recall the fable of the boy who cried wolf. He previously threatened to quit in August, even before his outsized pay deal was agreed upon. Now, apparently citing government interference with the compensation plans of AIG senior executives, he told the board he was prepared to quit. He didn't go, though, having agreed to reconsider his decision.

The former MetLife(MET Quote) CEO hasn't received much sympathy at AIG. He's being paid $10 million a year for his leadership of a failed company and perhaps he should just go, readers have said. Others mentioned that he would receive his full annual compensation even if he did leave. So he won't lose much.

Benmosche is a veteran and serial agitator, well-known for his bluntness. The board knew what they were getting when they appointed him as CEO in July. It was clear that he's extremely irritated about the restrictions on the salaries of AIG executives, claiming he would lose key employees. However, there must be many capable replacements available in this financial crisis, some who would willingly accept a salary restriction with a big upside for success.