David Axelrod, Obama's senior adviser, said the president will "have to move thoughtfully down a couple of tracks" to reassure the public. "The American people need to know why it's important that we maintain a functioning system of credit. But the people in the financial sector need to finally get the message that reckless risk-taking and greed are not values that anyone's going to embrace."
In Washington, New York and beyond Monday, the criticism over the AIG bonuses was swift:
• In New York, where AIG is based, Cuomo sent Liddy a letter threatening to issue subpoenas by 4 p.m. Monday if AIG did not provide the names of the executives getting bonuses under what the company called its "retention plan."
Cuomo demanded each person's job description and performance report, contracts obligating AIG to pay the bonuses, and the names of those who developed the retention plan. The amounts of the bonuses and the number of people getting them have not been made public.
"Covering up the details of these payments breeds further cynicism and distrust in our already shaken financial system," Cuomo said in the letter.
At 5:01 p.m., AIG spokeswoman Pretto released a statement that said, "We are in ongoing contact with the attorney general and will respond appropriately to the subpoena."
• In Congress, leaders from both parties accused AIG of using public money to fatten executives' bank accounts and encouraged the Obama administration to do everything in its power to kill the bonuses.
"It is my hope that the administration gets the message from the taxpayers on this issue," Senate Republican leader Mitch McConnell of Kentucky said. "Going forward, the American people need to have complete certainty that taxpayer money is not wasted in this way again."
House Minority Leader John Boehner, R-Ohio, called on Obama to issue an "exit plan" from the government's "sweeping involvement in private business."
And House Speaker Nancy Pelosi, D-Calif., said AIG executives "whose irresponsible risk-taking brought our financial system to the brink of collapse" should voluntarily forgo their "excessive retention payments."
• Outrage dominated the day on blogs, cable news and radio talk shows.
"AIG Hits The Tipping Point," read a huge headline on the left-leaning The Huffington Post.
"Rewarding Failure," the right-leaning Drudge Report said.
"Can capitalism survive the behavior of some capitalists?" conservative strategist Bill Kristol asked in a Washington Post blog.
AIG cites contract for bonuses
In a letter to Geithner sent with the explanation of the bonuses, Liddy said that he, too, had found the bonuses "distasteful." But he said contracts for them were negotiated long before he was asked by the government to take over the troubled insurer in September.
Since that time, the Treasury Department and the Federal Reserve have pledged up to $180 billion in aid to AIG, giving the government a nearly 80% stake in the company. That aid includes loans from the Fed and $40 billion in purchases of the company's stock out of the $700 billion financial rescue plan passed by Congress last year.
Company executives who receive money from the financial rescue plan are subject to compensation limits after legislation was signed into law in February.