Washington - The American International Group, which has received nearly $200 billion in bailout funds, last week paid bonuses to 418 employees, including $33.6 million to 52 people who have left the failed insurance conglomerate, according to the office of the New York attorney general.

House Financial Services Committee Chairman Rep. Barney Frank, D-Massachusetts. (Photo: AP)

    The company paid the bonuses, including more than $1 million each to 73 people, to almost all of the employees in the financial products unit responsible for creating the exotic derivatives that caused A.I.G.'s near collapse and started the government rescue to avoid a global financial crisis.

    The information adds to the firestorm confronting the Obama administration and Congress since the weekend disclosure that A.I.G., almost 80 percent owned by the government, paid out $165 million in bonuses.

    Even before the New York attorney general, Andrew M. Cuomo, divulged the new data on bonus payments in a letter to Representative Barney Frank, the Massachusetts Democrat and chairman of the Financial Services Committee, the White House and Congress separately were rushing to get out in front of the mounting public furor. From both ends of Pennsylvania Avenue, officials and lawmakers were condemning A.I.G., pointing fingers at each other and promising speedy action to recoup the taxpayers' money.

    The outcry likely will find an outlet on Wednesday, when Edward Liddy, the A.I.G. chief executive who took over after the bailout for $1 a year, testifies before a subcommittee of the House Financial Services Committee.

    New York's efforts against A.I.G. have overshadowed those of the Treasury secretary, Timothy F. Geithner, the official who is responsible for the financial bailout, along with the Federal Reserve. The White House and Treasury have been besieged by questions about why Mr. Geithner did not know sooner about the bonus payments due this month, and whether he could have done more to stop them, prompting White House officials to state President Obama's continued confidence in Mr. Geithner.

    "He more than has the president's complete confidence," said Rahm Emanuel, the White House chief of staff. As angry as the president is at the news about A.I.G., which he learned of Thursday, Mr. Emanuel said, "his main priority is getting the financial system stabilized, and he believes this is a big distraction in that effort."

    The House speaker, Nancy Pelosi, on Tuesday asked three committee chairmen, including Mr. Frank, to come up with legislation to recoup the bonus money, and suggested the House might pass a measure as early as this week.

    But the reaction of another of the chairmen, Representative Charles B. Rangel of the tax-writing Ways and Means Committee, underscored the legal and political complexities facing Democrats as they scramble for a solution. Mr. Rangel, a Democrat from New York, objected to one of the most popular ideas being floated - a confiscatory income tax on the recipients. The tax code is not "a political weapon," he told reporters.

    A.I.G. has refused to identify the current and former employees on privacy grounds, including one who received $6.5 million, but Mr. Cuomo is seeking to obtain and publicize their names.

    The employees took salaries of $1 in exchange for receiving the bonuses, which were supposed to keep them from leaving A.I.G., according to Mr. Cuomo's letter. That, he suggested, undercuts A.I.G.'s claims that it could not renegotiate the bonus contracts agreed to early in 2008, and that the payments were "retention" bonuses.

    "The only justification they had for this was, well we needed to keep these people, but there are 50 people who left anyway or who they decided they didn't need to keep," Mr. Cuomo said in an interview. "It debunks the only plausible argument they had - that they would die without these people."

    A spokeswoman for A.I.G., Christina Pretto, declined to confirm the numbers of people reported to have received retention bonuses before leaving the financial products unit. She said that it was common knowledge that A.I.G. was eliminating jobs in that division as part of its revamping, including jobs "that are, at the moment, critical to maintaining ongoing operations and winding down certain businesses."

    Late on Tuesday, Mr. Geithner and White House officials sent a letter to Congress seeking quick action on legislation to give the government more power to intervene and wind down companies like A.I.G. - as well as Bear Stearns and Lehman Brothers before it - that are huge players in the financial system but yet are not regulated the way banks are.

    The administration had planned to seek such regulatory powers as part of a broad revamping of financial regulations, but it is expediting this piece in response to the A.I.G. conflagration.

    In the letter, Mr. Geithner confirmed that the government would subtract $165 million - the amount of the bonuses - from a coming $30 billion loan to A.I.G. that would bring the total loans to $200 billion from the original $85 billion.

    Mr. Geithner reiterated the Treasury position of last week that lawyers inside and out of government agreed that "it would be legally difficult to prevent these contractually mandated payments."

    That position was being questioned at the Capitol. Congressional Republicans, eager to implicate Democrats, initially blamed Senator Christopher J. Dodd, the Connecticut Democrat who heads the banking committee, for adding to the economic recovery package an amendment that cracked down on bonuses at companies getting bailout money, but that exempted bonuses protected by contracts, like A.I.G.'s.

    Mr. Dodd, in turn, responded late Tuesday with a statement saying that the exemption actually was inserted at the insistence of Treasury during Congress's final legislative negotiations.

    Senator Ron Wyden, a Democrat from Oregon, and Senator Olympia J. Snowe, a Republican from Maine, said that Treasury officials also opposed their proposal for a 35 percent tax on bonuses of more than $10,000 at government-supported companies. The provision was deleted in the final negotiations on the economic stimulus bill. "It was one of these things where everybody said it was somebody else's fault," Mr. Wyden said.

    A Treasury official said they had not supported the Wyden measure but had done nothing to seek its removal from the stimulus bill.

    While the administration has been most on the defensive, the competing expressions of outrage in Congress throughout Tuesday belied the fact that a few less prominent Democrats had tried to draw attention to the A.I.G. retention bonuses since last November. Except for their condemnations last December, A.I.G.'s disbursement of an initial $55 million in retention payments went largely unremarked upon.

    While House leaders were calling for immediate legislation to recoup payments, Senate Democrats sent a letter to Mr. Liddy demanding that A.I.G. renegotiate the employees' compensation contracts and return the bonuses. Senator Harry Reid and other Democratic leaders proposed new taxes on the bonuses.

    --------

    Jackie Calmes reported from Washington, and Louise Story from New York. Edmund L. Andrews and David M. Herszenhorn contributed reporting from Washington.

www.truthout.org/031809K