Treasury to dock AIG $165M

? In an effort to quell a mounting furor, the Treasury Department said late Tuesday that it would require American International Group to repay the government more than $165 million for bonuses doled out last week to the executives blamed for driving the firm to insolvency.

In a letter to congressional leaders, Treasury Secretary Timothy Geithner said the money would be deducted from the government’s latest $30 billion infusion of bailout funds to the insurance giant at the center of the nation’s deepening financial crisis.

Geithner also said future bonuses would be subject to tough new limits now being developed for crippled companies getting rescued with taxpayers’ money.

The bonus payments, which came to light over the weekend, have provoked nationwide disbelief and touched off finger-pointing from the White House to Wall Street. New York Attorney General Andrew Cuomo disclosed on Tuesday that 73 present and former employees received at least $1 million each in bonuses.

In his letter to Democratic and Republican leaders of Congress, Geithner said he called AIG Chairman and Chief Executive Edward Liddy and “registered my strong objections” after first learning of the planned bonuses.

Citing legal opinions that it was required to honor the bonuses, AIG made the payments last week.

In his disclosure Tuesday, Cuomo said individual bonuses were as high as $6.4 million. AIG even gave $4.6 million to an unidentified official who has left the company and at least $1 million to 10 other former employees, Cuomo said in a separate letter to Congress.

AIG, however, has continued to shield the names of the recipients.

In his letter to Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee, Cuomo also said that seven people were paid more than $4 million each and 22 got at least $2 million each.

Cuomo said that his office obtained copies of contracts providing for the bonuses, and they “shockingly” required most of the awards to match what the employees got in 2007, “despite obvious signs that 2008 performance would be disastrous in comparison to the year before.”

AIG attorneys apparently failed to consider the argument that contracts committing the company to pay bonuses exceeding $165 million might be invalid because the firm would be bankrupt were it not for a taxpayer bailout that’s now approaching $182 billion, Cuomo wrote Frank.

The disclosures put Liddy under mounting pressure as he prepared to testify today before a House Financial Services subcommittee examining the firm’s impact on the global economy.