Obama to seek 'every single legal avenue' to block AIG bonuses

President will ask Treasury Secretary Timothy Geithner "to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole."

WASHINGTON (MCT) - President Barack Obama said Monday that he will seek "every single legal avenue" to block the payouts of $165 million in executive bonuses by American International Group, the insurance behemoth that taxpayers are spending billions to bail out.

Unleashing his criticism in the White House East Room at an event announcing new help for small businesses hurt by the recession, the president blamed AIG's financial woes on its executives' "recklessness and greed," and asked, "How do they justify this outrage to the taxpayers who are keeping the company afloat?"

AIG is getting about $170 billion in taxpayer assistance and is now about 80 percent taxpayer-owned. Federal officials moved to save it last fall because they thought its failure would take down the global financial system since AIG insured the assets of so many major financial institutions. "Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay," Obama said.

Polls show that Obama has begun to face declining public support because of the economic crisis. With his criticism of AIG, he sought to separate himself from the excesses of those receiving taxpayer assistance and stand with taxpayers who are angered by the situation.

Obama's remarks followed weekend reports about the AIG bonuses. He said that given the taxpayer assistance that AIG is receiving, he would asked Treasury Secretary Timothy Geithner "to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole."

It wasn't immediately clear what recourse the government has. Obama said that Geithner was "working to resolve this matter" with AIG's new chief executive, Edward Liddy, who began his job after the contracts were signed that led to the bonuses in question. "This is not just a matter of dollars and cents, it's about our fundamental values," Obama said.

Several lawmakers applauded the president's move.

Sen. Russ Feingold, D-Wis., said Obama "is doing the right thing."

"At a time when millions of Americans are losing their jobs and trying to make ends meet, it is outrageous that a company that has been bailed out by the taxpayers for its mistakes would turn around and pay its executives such a staggering sum of money."

Even before Obama's remarks, lawmakers of both parties expressed dismay at the bonuses. Senate Minority Leader Mitch McConnell, R-Ky., appearing Sunday on ABC News, called it "an outrage."

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"We all know that contracts are valid in this country, but they need to be looked at. Did they enter into these contracts knowing full well that, as a practical matter, the taxpayers of the United States were going to be reimbursing their employees?"

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© 2009, McClatchy-Tribune Information Services.