The Treasury Department will order embattled insurance giant American International Group Inc. to repay U.S. taxpayers up to $165 million that the company is giving employees as bonuses, Treasury Secretary Timothy Geithner said late Tuesday.

Acknowledging "considerable outrage" about the bonus payments, Geithner said AIG will pay the Treasury an amount equal to the payments, and the Treasury will deduct that amount from the $30 billion in government assistance that will soon go to the company.

"We will impose on AIG a contractual commitment to pay the Treasury from the operations of the company the amount of the retention awards just paid," Geithner said in a letter to congressional leaders.

Geithner is using the controversy over employee pay at AIG to press Congress to work with the Obama administration to shore up regulations of the financial industry.

The treasury secretary, who has been criticized for his handling of AIG's employee bonuses, said in the letter that "we should not lose focus on the larger issue it raises."

"This situation dramatically underscores the need to adopt, as a critical part of financial regulatory reform, an expanded 'resolution authority' for the government to better deal with situations like this," Geithner wrote.

He also outlined how the administration learned of the $165 million in bonuses and how it is responding.

AIG has been the recipient of more than $170 billion in federal aid, part of an effort to rescue the giant insurance company from collapse. The federal government now holds an 80 percent stake in the company, further fueling outrage over the bonuses that were mandated by employee contracts that predated the bailout money.

Despite the outrage in Washington and across the country since news broke Saturday about the bonuses, President Obama is standing behind Geithner. White House chief of staff Rahm Emanuel categorically dismissed to the Associated Press on Tuesday any suggestion that Geithner was in trouble, and Press Secretary Robert Gibbs told reporters that Obama has "complete confidence" in Geithner.

Gibbs, during his daily news conference, didn't give an explanation as to why President Obama was unaware of the $165 million in bonuses until last week, but later Tuesday, a senior administration official provided a timeline of events that coincided with the outline provided by Geithner in his letter.

Click here to read a PDF of Geithner's letter.

The timeline said Geithner learned of the bonuses on March 10 and, after expressing his outrage to AIG officials and researching the government's options, notified the White House of the bonuses on Thursday, two days later.

New York Attorney General Andrew Cuomo added to the outrage on Tuesday when he said his office had found that 73 employees at AIG received bonuses of $1 million or more, with one receiving more than $6 million. Cuomo, who is launching an investigation into the company, reported the latest findings in a letter to Rep. Barney Frank, D-Mass., chairman of the House financial services committee.

Lawmakers, meanwhile, expressed outrage on Capitol Hill about the bonuses, even as they tried to explain a provision included in the $787 economic stimulus package passed by Congress last month that seemed to give AIG a loophole for doling out the bonuses.

The amendment, meant to restrict executive pay for bailed-out banks, included an exception for "contractually obligated bonuses agreed on or before Feb. 11, 2009." This would seem to exempt the AIG bonuses that lawmakers and President Obama are looking to recover.

Gibbs said the Obama administration has taken "extraordinary actions" to protect taxpayers in whatever ways it can and will work "as quickly as possible" with Congress to recoup the AIG bonuses.

"I think the secretary of treasury took extraordinary steps based on contracts that were in existence in April of last year in order to do all that he could to protect the taxpayer," Gibbs said. 

Republicans have sharply criticized Geithner after learning the bailed-out insurance company was distributing the bonuses. House Minority Whip Eric Cantor said the administration is in "disarray." 

Like the administration, House and Senate lawmakers are scrambling to find ways to block or recoup the AIG money. But they've expressed doubt about the ability of the White House to handle the issue. 

Sen. Richard Shelby, R-Ala., suggested Tuesday that Geithner does not have a grasp on the AIG matter. 

"Did Secretary Geithner know and look the other way?" said Shelby, the ranking Republican on the Senate Banking, Housing and Urban Affairs Committee.

"I think Secretary Geithner does not have his hands around the details of this, and if he does, then there's a lot more questions to be asked," he said. 

Gibbs was peppered with questions at his daily briefings Monday and Tuesday on why the administration didn't act earlier -- such as when it was offering another $30 billion to the company in early March. 

Gibbs said Monday, "Based on what I read in the newspaper," the administration learned about the bonuses last week. He declined to offer a timeline on Tuesday. 

Obama said Monday he's instructed Geithner to use the government's leverage to pursue ways to "block these bonuses." 

"This is not just a matter of dollars and cents. It's about our fundamental values," Obama said.