UPDATE 1-Simpson stays on U.S. deficit panel-White House

(Adds more comment, background.)

WASHINGTON Aug 30 (Reuters) - Alan Simpson, co-chairman of a commission created by President Barack Obama on the U.S. budget deficit, will remain on the panel despite a controversial remark in an e-mail, White House spokesman Robert Gibbs said on Monday.

"We regret that he sent that e-mail. We don't condone those comments," Gibbs told a daily news briefing. "Senator Simpson has and will continue to serve on the commission."

Women's groups and some lawmakers called for Simpson's resignation last week after he wrote in an e-mail to one of his critics that the Social Security retirement program had reached the point "where it's like a milk cow with 310 million tits."

Simpson, a former Republican senator from Wyoming, later issued an apology for the comment.

His e-mail took issue with a column written by the executive director of the Older Women's League, a group representing middle-aged and elderly women, which accused him of "ageism and sexism" for considering cuts to Social Security as a way of reducing the budget deficit.

Simpson's e-mail was embarrassing for some Democrats who have been seeking to boost their candidates before the Nov. 2 congressional elections and have attacked Republicans for proposals to privatize Social Security.