For now, Democrats weren't calling for Geithner's resignation, but they weren't volunteering much confidence in him, either. White House press secretary Robert Gibbs did say that Obama had confidence in his treasury secretary, and Gibbs sought to switch the focus to changes that are in the works. He said Obama wants both financial regulation reform and a new "resolution authority" to deal with giants like AIG that get into complex financial trouble.
Administration officials moved to reassure Congress, the markets and the nation that Geithner had urged AIG Chief Executive Edward Liddy last week to find a way to renegotiate contracts that called for the bonuses.
"He recognized that you can't just abrogate contracts willy-nilly, but he moved to do what could be done," Summers, Obama's chief economic adviser, told the Associated Press in an interview Tuesday.
Even though AIG's bonus plans were disclosed last year, populist outrage and threats poured forth from Capitol Hill on Tuesday.
On Monday, Obama ordered Geithner to "pursue every legal avenue" to get the money back.
"How do they justify this outrage to the taxpayers who are keeping the company afloat?" Obama demanded of the company that last month posted the largest corporate quarterly loss in history, $61.7 billion.
Obama's scolding of AIG came after his top economic advisers — Geithner, White House chief economist Christina Romer and Summers, director of the National Economic Council — also blasted AIG over its doling out bonus checks ranging from $1,000 to $6.5 million to executives after accepting up to $180 billion in government bailout money.
The criticism reflected not just the rising anger over the bonuses, but also the question the flap poses for the president and Congress: how to continue with plans to rescue the economy which could include billions more dollars in taxpayer money to shore up banks and other interests — in the face of growing public disgust with corporate America.
It will be difficult political terrain for a president already confronted with crippling job losses, a credit crunch, a home foreclosure crisis and a shaky stock market whose decline has been an assault on Americans' savings and investments.
On Monday, Cuomo had demanded details about which executives would get the bonus money as part of an investigation by his office into whether the payments violated state law. Most of the money is going to executives in the unit that sold risky credit default swaps, the contracts that caused huge losses for the insurance company.
AIG's Liddy, who had no comment Monday, will be in Washington on Wednesday to appear before a House subcommittee on capital markets in what is likely to be a contentious hearing. In an explanation of the bonus plan delivered to Geithner on Saturday, AIG said the bonus contracts were struck for 400 workers a year ago when the division they worked for was "expected to have a significant, ongoing role at AIG."
In a recent conversation, "I told him his actions were going to threaten the possibility that we could get additional money that is necessary to save the economy," said Rep. Paul Kanjorski, D-Pa., chairman of the subcommittee. "It's going to be very difficult. …The American people don't know what to believe about all of this, and neither do I."
Rep. Gary Peters, D-Mich., introduced legislation to try to stop the payments. He called them "a raid on taxpayer dollars."