World and Nation

Obama Moves to Quell Fury Over AIG Bonuses

President Barack Obama and his top economic advisers scrambled to calm a nationwide furor on Monday over bonuses paid at American International Group, even as administration officials acknowledged they had known about the issue for months.

One day after the economic advisers insisted that their hands had been tied by contracts requiring the payments, Obama ordered the Treasury department to “pursue every single legal avenue to block these bonuses” and make the American taxpayers whole.

“In the last six months, AIG has received substantial sums of from the U.S. Treasury,” Obama said. “How do they justify this outrage to the taxpayers who are keeping the company afloat?”

But as anger from lawmakers increased and criticism of the retention bonuses overshadowed other news for a second consecutive day, White House and Treasury officials offered only a general sense of how they would carry out Obama’s order and few explanations for why they had not acted earlier.

White House officials said the Treasury would recapture the bonus money by writing new requirements into a $30 billion installment of government aid scheduled to go soon to the ailing insurance conglomerate. The government has already provided $170 billion in taxpayer assistance to keep AIG from failing and now owns nearly 80 percent of the company.

But administration officials conceded that almost all of the most recent round of bonuses, totaling $165 million, had been paid last Friday, one day before the Treasury publicly acknowledged that it had reluctantly approved the payouts. The officials said that people who received the bonuses would probably be able to keep them.

By seeking to link repayment of the bonus money to the coming $30 billion in assistance, the administration seemed to leave open the possibility that the company would effectively be repaying taxpayers with taxpayer money. A Treasury official disputed that taxpayers would be repaying themselves, but could not specify how else the company would give back the money.

Increasing the pressure on the company, Andrew M. Cuomo, the New York attorney general, said he would subpoena AIG for the names, job descriptions and performance evaluations of the employees receiving the bonuses.

“You could argue that if taxpayers hadn’t bailed out AIG, the contracts wouldn’t be worth the paper they were signed on,” Cuomo said.

For all the furor since details of the bonuses became public over the last several days, the issue of retention payments to AIG employees globally has been percolating publicly since AIG was bailed out in mid-September. About $1 billion in retention payments for 2008 and 2009 are in question, but the controversy involves about half of that, about $450 million over two years, that was intended for employees of AIG’s financial products unit. That unit was the source of the financial derivatives blamed for the near-meltdown at the heart of the economy’s downturn.

Treasury and Federal Reserve officials said they had known about the program as far back as last fall.