Lawmakers Turn Fire on Obama Administration Over AIG Bonuses

Lawmakers outraged at bailed-out American International Group's move to pay $165 million in executive bonuses are turning their fire on the Obama administration, asking why top officials didn't act to prevent the pay-out earlier.

Though President Obama pledged last month to crack down on executive pay for companies that take "exceptional" amounts of federal bailout money, the administration now seems to be struggling to take action to retrieve the bonuses AIG says it is contractually obligated to pay.

This, despite the fact the government, with its $170 billion in assistance, holds about an 80 percent stake in the company, and just pledged another $30 billion.

"It seems like they are an administration in disarray," House Minority Whip Eric Cantor, R-Va., said Tuesday.

Sen. Richard Shelby, R-Ala., suggested Treasury Secretary Timothy Geithner does not have a handle on the AIG matter.

"We need to find out when these bonuses were approved and more than that, when they were contracted for. And who knew this?" said the ranking Republican on the Senate Banking, Housing and Urban Affairs Committee. "Did Secretary Geithner know and look the other way?"

The senator, a harsh critic of the Treasury's bailout program known by its acronym "TARP," or Troubled Assets Relief Program, said members who voted for the program bear some blame, but he put much of the fault at Geithner's feet.

"There's either competence or incompetence going on here, and it looks like a lot of incompetence," Shelby said, adding: "I think this is the tip of the iceberg."

"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.

Shelby, interviewed on CBS' "Early Show," raised the possibility of resignation, saying: "I don't know if he should resign over this. That's up to -- you know, he works for the president of the United States."

White House Press Secretary Robert Gibbs said Tuesday the president has "complete confidence" in Geithner.

Outrage continues to spread through the halls of Congress, as members' offices are inundated with calls from angry constituents. The Federal Reserve as well as the Treasury Department are coming under a harsh spotlight, since both gave taxpayer dollars to AIG (though the majority of the funding came from the Fed).

Gibbs was peppered with questions at his daily briefings Monday and Tuesday on why the administration didn't act earlier -- like 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.

Sen. Chris Dodd, chairman of the Senate banking panel, is calling for a full briefing from both the Federal Reserve and the Treasury on exactly why so-called retention bonuses were paid to executives in the wing of AIG that is said to have brought the mega-insurer to its knees and helped push the global economy to the brink of disaster.

"Why wasn't the Fed putting conditionality four different times they provided resources to AIG?" asked Dodd, who included in the $787 billion stimulus package an "exception for contractually obligated bonuses agreed on before Feb. 11, 2009."

"We need to find out exactly who they are and exactly how many more may be coming along," Dodd said, referring to recipients of the bonuses and any future perks for other executives at companies getting a taxpayer-funded federal bailout, including AIG.

When asked if Congress should mandate conditions with legislation, Dodd said, "We may have to." The Senate is trying to draft legislation that would recover the bonus money.

House Minority Leader John Boehner also shifted blame to the administration in a written statement Monday, suggesting the GOP could put up added resistance to proposals to extend more aid to the financial sector.

"Taxpayers are not receiving an adequate accounting from either the Treasury or the management of the companies that received taxpayer funds," he said. "The latest revelation about AIG executives receiving millions in bonuses while taxpayers continue to bail out the company with hundreds of billions of dollars is outrageous and the clearest example yet of why an exit strategy is essential."

He called on the administration to recover the bonuses, and then present Congress with an exit plan.

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.

In early February, Obama announced what were intended to be strict limits on pay to executives of bailed-out firms. The restrictions would cap pay at $500,000, with the most restrictive limits on those companies that receive "exceptional" assistance. Obama said at the time he would stop the "culture of narrow self-interest" on Wall Street.

Gibbs said the new compensation rules are "prospective, based on some limitations that we have in looking backwards."

Rep. Scott Garrett, R-N.J., told PBS' "The NewsHour With Jim Lehrer" Monday that Geithner must have known about the bonuses earlier.

"So it's only now that it's making headlines that the president is coming back and basically second-guessing his own treasury secretary on this. Why Secretary Geithner didn't raise this when he first understood it is beyond me," Garrett said.

Though lawmakers are turning fire on the administration, they are still directing a heavy dose of outrage on the company itself.

Sen. Charles Grassley, R-Iowa, even went so far as to suggest Monday that AIG executives either resign or "go commit suicide."

FOX News' Trish Turner contributed to this report.