Obama blisters AIG, promises to try to block bonuses

WASHINGTON -- Joining a wave of public anger, President Obama blistered insurance giant AIG for "recklessness and greed" Monday and pledged to try to block it from handing its executives $165 million in bonuses after taking billions in federal bailout money.

"How do they justify this outrage to the taxpayers who are keeping the company afloat?" Obama asked. "This isn't just a matter of dollars and cents. It's about our fundamental values."

Obama joined other officials in criticizing American International Group, the company that is fast becoming the poster boy for Americans' bailout blues.

The bonuses could contribute to a backlash against Washington that would make it tougher for Obama to ask Congress for more bailout help and jeopardize other parts of his agenda. The president and his aides were working to distance themselves from the insurer's conduct to contain possible political damage and try to boost public confidence in the administration's handling of the economic rescue effort.

David Axelrod, senior adviser to Obama, said there was no question the bonuses and the public's anger over them could run many things off the rail. "People are angry because they've seen exhibit after exhibit of irresponsibility and people walking away with money in their pockets," he said. "It's undermined the discussion that we have to have."

Ron Edmonds ~ Associated PressPresident Barack Obama speaks Monday to small business, community lenders and members of Congress in the East Room of the White House in Washington.

Obama had scheduled a speech Monday to announce new help for recession-pounded small businesses. But first, he said, he had a few words to say about AIG. He lost his voice at one point and ad-libbed, "Excuse me, I'm choked up with anger here."

"This is a corporation that finds itself in financial distress due to recklessness and greed," Obama said.

He said he had directed Treasury Secretary Timothy Geithner to "pursue every legal avenue to block these bonuses and make the American taxpayer whole."

White House spokesman Robert Gibbs said the administration would modify the terms of a pending $30 billion bailout installment for AIG to at least recoup the $165 million the bonuses represent. That wouldn't rescind the bonuses, just require AIG to account for them differently.

Axelrod called the bonuses "spectacularly tone-deaf."

He said the administration hoped the tough talk would result in voluntary action on the part of AIG and its bonus recipients, although that remains an open question. "All we can do is administer this thing going forward," he said.

A call to AIG's corporate headquarters in New York seeking comment was not returned immediately late Monday.

On a separate track, New York Attorney General Andrew Cuomo said Monday he would issue subpoenas for information on the bonuses after AIG missed his deadline for providing details. Cuomo said his office would investigate whether the employees were involved in AIG's near-collapse and whether the bonus payments were fraudulent under state law.

AIG spokeswoman Christina Pretto said, "We are in contact with the attorney general and will of course respond to his request."