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Treasury Secretary Geithner defended the federal government's bailout of AIG on Capitol Hill Thursday.

WASHINGTON (CNNMoney.com) – Treasury Secretary Tim Geithner said on Thursday that he had no choice but to pay top dollar to business partners of troubled insurer AIG to avert a deeper financial panic last year.

Geithner defended regulators' actions to prop up American International Group (AIG, Fortune 500) with $62.1 billion that was essentially funneled to 16 banks that were counterparties to AIG insurance contracts.

"I don't understand why this is so complicated," Geithner told the Congressional Oversight Panel at a hearing on Capitol Hill. "You either prevent default, because default would be cataclysmic – or you don't. If you selectively default on any, the thing will come crashing down."

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NEW YORK (CNNMoney.com) – The CEO of bailed-out insurer American International Group told Congress Wednesday that it has made "substantial" progress in its restructuring efforts, but lawmakers said they wanted more to show for it.

"We are hearing, 'Trust us,' but we are not willing to let $180 billion go just on trust," said Rep. Edolphus Towns, D-N.Y., chairman of the House Oversight Committee. "We will question; we will inquire; we will verify."

Chief Executive Edward Liddy, who said AIG is diligently working toward paying back its government bailout, described the company's plan for paying back billions of taxpayer dollars.

"We continue to weigh every decision regarding the restructuring with several criteria in mind," Liddy said. "Will this action facilitate a reduction in systemic risk? Is this action the best use of the federal assistance we are receiving? Will this action enhance our ability to pay back the government?"

"The restructuring efforts ... are a reflection of this thought process," he added.

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There's new evidence today that Senator Chris Dodd is in political trouble back home in Connecticut.

(CNN) – There's new evidence today that Senator Chris Dodd is in political trouble back home in Connecticut.

Only one out of three Connecticut voters questioned in a Quinnipiac University poll released Thursday approve of the job Dodd's doing as senator, his lowest approval rating ever. Fifty-eight percent disapprove of how Dodd's handling his duties, up 14 points from last month.

The five term Democratic senator is up for re-election in November of next year and the poll indicates that Dodd trails former Republican Congressman Rob Simmons, a potential Republican challenger, 50 percent to 34 percent. Dodd trailed Simmons were basically deadlocked in Quinnipiac's poll from early last month.

Matched against two other possible Republican challengers, the poll suggests that Dodd trails both State Sen. Sam Caligiuri by four points and former ambassador Tom Foley by eight points.

Fifty-nine percent of those questioned say they will definitely or probably vote against Dodd in 2010.

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CNN's Ed Henry says he had several provocative questions prepared in advance of the news conference.

Ed Henry, CNN's senior White House correspondent, got a tough answer from President Obama when he asked Tuesday night why Obama waited days to express outrage on the AIG bonuses. "Because I like to know what I'm talking about before I speak," Obama said. Here's Henry's take on what happened.

WASHINGTON (CNN) - The most amazing part of the exchange to me is that I didn't go into the East Room intending to ask President Obama about AIG.

After frantic preparation for the prime-time newser with several colleagues, especially lead CNN White House producer Tim McCaughan, I had several provocative questions in my pocket.

But none of them had much to do with the financial crisis because I assumed several of my colleagues would exhaust the topic of AIG before my turn came up.

Watch: Ed Henry on his exchange with Obama

At the first presser in February, I was about the 10th reporter the president called on. The economy had been chewed over so I went with a "sidebar" question about whether Obama, given his push for transparency, would overturn the policy at Dover Air Force Base preventing media coverage of coffins returning from Iraq and Afghanistan.

It was a surprise line of inquiry. The president made news by saying the policy was under review - and a few weeks later he overturned it.

I was heading into this event with the same strategy: make news on something unexpected (I won't tell you which topics I was working on cause it would ruin the surprise for a future presser or interview with the president).

But on Tuesday night, as I sat in the front row nervously reviewing my hypothetical questions written out in longhand (decidedly old school), I kept thinking back to a conversation I had with Wolf Blitzer Saturday night at the Gridiron dinner.

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WASHINGTON (CNN) – The populist wave that swept Capitol Hill last week against controversial bonuses paid to AIG executives stalled Monday after the White House and several key senators raised concerns about legislation to heavily tax the bonus payments.

"In light of concerns raised by President Obama and Senate Republicans we need additional time to discuss next steps," Jim Manley, a spokesman for Senate Majority Leader Harry Reid of Nevada said late Monday.

In response to the criticism, Senate Finance Committee Chairman Max
Baucus, D-Montana, who angrily denounced the AIG bonuses last week, said he's been talking to White House officials and to other senators about changing the bill he introduced just Friday.

"I want to hear what senators have to say. A lot are weighing in now with different ideas," Baucus said. "Some are tax. Some are regulatory. But they're still all addressing bonuses."

Baucus said he does not know when his bill - which appeared to be on a fast track last week - will be considered by the Senate.

On Sunday, President Barack Obama said on the CBS News program "60 Minutes" that, "You don't want to be passing laws that are just targeting a handful of individuals."

Democratic sources told CNN that statement was a subtle public warning that was privately delivered to Senate Democrats in a much more direct way.

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Gov. Granholm begged the Obama administration to help the manufacturing sector, which she called the backbone of the middle class in this country.

WASHINGTON (CNN) – Michigan Gov. Jennifer Granholm told President Barack Obama to ignore persistent Republican criticism that he is trying to do too much in a time of economic crisis and, instead, urged the new president to tackle the nation’s health care costs as part of a larger effort to get the economy back on track.

Watch: Granholm has some advice for Obama

“I think he should do it,” Granholm said when asked whether Obama should forge ahead with health care reform even if doing so meant more taxes or more deficit spending in the current tough economic times.

“It is part of the economy. If you look at the manufacturing sector, one of the huge costs on that sector is health care,” the governor said, noting the impact that health care costs are having on her state’s automotive industry. “It is part of the economic malaise that this country is feeling. So they need to fix that.”

In the wake of Obama’s efforts late last week to tamp down growing controversy over $165 milllion in bonuses paid to AIG employees, Granholm also highlighted a growing sense of a double standard in Michigan.

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Tim Geithner is facing what President Obama called the toughest challenges of any Treasury secretary since Alexander Hamilton.

(CNN) – Treasury Secretary Tim Geithner sat alone at the witness table answering questions and getting an earful from a panel of senators.

Sen. Kent Conrad, D-N.D., chairman of the Senate Budget Committee, cautioned Geithner that Americans were crazy angry about corporate bailouts.

"I have never - in the 22 years I've been here, I've never seen such anger, with the sense of betrayal, that people in positions of responsibility took advantage of them," said Conrad. "The outrage of people cannot be dismissed."

That was on March 12. It turns out, the next day was when American International Group would award $165 million in bonuses to some 400 employees.

Over the past week, Congress turned the anger over AIG into legislation. The House rushed through a bill to tax bonuses, and the Senate made a similar proposal.

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American International Group has received $170 billion in government money since September.

(CNN) - Twenty state attorneys general announced investigations Friday into the $165 million bonuses paid by insurance giant AIG last week, with Connecticut's top lawyer issuing subpoenas to CEO Edward Liddy and 11 other executives.

Connecticut Attorney General Richard Blumenthal and the Democratic chairman of the General Assembly's Banks Committee want Liddy and other executives to appear Thursday and bring with them "original or copies of documents regarding the AIG Financial Products Corp. retention bonus plan and any related contracts or agreements."

"Now living off supersized taxpayer-paid bonuses, these AIG employees have a moral and legal obligation to appear at this legislative hearing and disclose details about corporate compensation to employees as well as investment decisions by AIG Financial Products Corp. involving credit derivatives and dealings that have led to market destruction," said Blumenthal, a Democrat.

AIG officials are citing a Connecticut law to justify their payment of the bonuses. The law says that employees can sue in civil court for payments withheld that are due them and recoup double the amount of money. Many AIG employees live in Connecticut.

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The president, joined by his lead economic advisers, spoke with the press about AIG's bonuses from the South Lawn of the White House Wednesday.

WASHINGTON (CNN) - Senate Banking committee Chairman Christopher Dodd told CNN Wednesday that he was responsible for language added to the federal stimulus bill to make sure that already-existing contracts for bonuses at companies receiving federal bailout money were honored.

Watch: I added bonus loophole, says Dodd

Dodd acknowledged his role in the change after a Treasury Department official told CNN the administration pushed for the language.

Both Dodd and the official, who asked not to be named, said it was because administration officials were afraid the government would face numerous lawsuits without the new language.

Dodd, a Democrat, told CNN's Dana Bash and Wolf Blitzer that Obama administration officials pushed for the language to an amendment designed to limit bonuses and "golden parachutes" at those companies.

"The administration had expressed reservations," Dodd said. "They asked for modifications. The alternative was losing the amendment entirely."

On Tuesday, Dodd denied to CNN that he had anything to do with adding the language, which has been used by officials at bailed-out insurance giant AIG to justify paying millions of dollars in bonuses to executives after receiving federal money.

Updated 6:54 p.m.

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Sen. Dodd told CNN Wednesday that officials in the Treasury Department asked him to add the bonus loophole to the stimulus bill before it was passed.

WASHINGTON (CNN) - Senate Banking committee Chairman Christopher Dodd told CNN’s Dana Bash and Wolf Blitzer Wednesday that he was responsible for adding the bonus loophole into the stimulus package that permitted AIG and other companies that received bailout funds to pay bonuses.

Watch: I'm responsible for bonus loophole, Dodd says

On Tuesday, Dodd denied to CNN that he had anything to do with the adding of that provision.

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On Wednesday's 'American Morning,' Rep. Barney Frank, who chairs the House Finance Committee, shared what was legally and legislatively within the government's power on recovering the AIG bonuses.

(CNN) – As the tide of outrage over AIG bonuses continued unabated Wednesday, a congressional committee became the epicenter of the issue as Edward Liddy, CEO and chairman of the troubled insurer, prepared to answer questions about executive bonuses.

On Wednesday's "American Morning," Rep. Barney Frank, who chairs the House Finance Committee, shared what was legally and legislatively within the government's power on recovering the AIG bonuses and reforming the whole financial incentive system.

Watch: Bonuses not deserved, Frank says

Kiran Chetry, CNN anchor: When he appears before your committee today, what type of assurances are you guys seeking from Mr. Liddy with regard to these bonuses?

Rep. Barney Frank, D-Massachusetts: Well, I don't have a lot of confidence in Mr. Liddy's view at this point. When he said that first he couldn't get the money back because they had contractual rights but also that he was worried about not retaining them, it left me unconvinced he's really going to be trying.

CNN's Lisa Desjardins and John Lisk reveal what's ahead for AIG on Capitol Hill.

To subscribe to this podcast, go to cnn.com/podcast.

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Democratic leaders scrambling to strip AIG executives of bonuses are having a hard time answering a key question: Why didn't Congress act to prevent the bonuses in the first place.

WASHINGTON (CNN) – Democratic leaders scrambling to strip AIG executives of bonuses are having a hard time answering a key question: Why didn't Congress act to prevent the bonuses in the first place.

"There's always more we can do, and hindsight is 20/20," said Senate Majority Leader Harry Reid Tuesday.

But though some lawmakers did move to prevent bonuses in the stimulus bill last month, the final language actually makes an exception for pre-existing contracts, effectively exempting AIG.

Senate Banking Committee Chairman Chris Dodd, D-Connecticut, who originally proposed the executive compensation provision, said he did not include the exemption clause, which said new rules "shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009."

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President Barack Obama defended his treasury secretary Wednesday, saying that no one in the Obama administration had been Responsible for supervising ailing insurance giant AIG.

WASHINGTON (CNN) – President Barack Obama defended his treasury secretary Wednesday, saying that no one in the Obama administration had been Responsible for supervising ailing insurance giant AIG.

Tim Geithner "is making all the right moves in terms of playing a bad hand," the president said.

"There has never been a secretary of the treasury, except maybe Alexander Hamilton, right after the Revolutionary War, who has had to deal with the multiplicity of issues that Secretary Geithner's having to deal with," he said.

The president spoke to reporters just outside the White House as he prepared to depart on a trip to California.

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(CNN) – As outrage over American International Group bonuses spreads and finger-pointing continues, lawmakers are trying to convince the public that it isn't their fault.

Senators and representatives are vowing to get the bonus money back, but questions have risen why didn't Congress act to prevent the bonuses in the first place?

"Well, the only lever we have in this is the fact that these corporations have come to the Congress of the United States and want a taxpayers' bailout," Sen. Chuck Grassley, R-Iowa, said Wednesday on CNN's "American Morning."

"If it weren't for that, we would not have any leverage on how any individual corporation is being run, and we don't pretend to have any leverage on any corporation today in the United States that's not seeking federal help," said Grassley, the top Republican on the Senate Finance Committee.

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(CNN) - As Congress grills AIG's chief executive Wednesday, here's a look at the top ten political recipients of AIG donations for the 2008 election cycle, according to the Center for Responsive Politics.

The top ten recipients of AIG donations for the 2008 election cycle:
Sen. Chris Dodd, D-Connecticut: $103,100
President Barack Obama: $101,332
Sen. John McCain, R-Arizona: $59,499
Secretary of State Hillary Clinton: $35,965
Sen. Max Baucus, D-Montana: $24,750
Former presidential candidate Mitt Romney: $20,850
Vice President Joe Biden: $19,975
Rep. John Larson, D-Connecticut: $19,750
Sen. John Sununu, R-New Hampshire: $18,500
FormerpPresidential candidate Rudy Giuliani: $13,200

Edward Liddy, chief executive of bailed out insurer American International Group, will tell Congress Wednesday that he found the company's controversial bonuses 'distasteful,' but necessary because of legal obligations and competition.

WASHINGTON (CNNMoney.com) – Edward Liddy, chief executive of bailed out insurer American International Group, will tell Congress Wednesday that he found the company's controversial bonuses "distasteful," but necessary because of legal obligations and competition, according to a written copy of his testimony.

"We have to continue managing our business as a business - taking account of the cold realities of competition," Liddy will tell the House Financial Services subcommittee. The hearing is set to begin at 10 a.m.

"Because of this, and because of certain legal obligations, AIG has recently made a set of compensation payments, some of which I find distasteful," he added.

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WASHINGTON (CNN) – When the White House first got wind of the executive bonuses at American International Group, the disbelief was palpable.

"You smack your head and you say 'You've gotta be kidding me,' " senior presidential adviser David Axelrod tells me. "It put another brick on the load we're carrying."

Or a concrete block.

Just as the White House readies its long-awaited plan to bail out the banks - having presented its plans for housing and small business - a new wave of anger is precisely what it doesn't need. And to make matters worse, it's a widespread anger that is not grounded in the more ordinary resentments between economic classes.

In fact, this new populism is almost unanimous: The banks were greedy and reckless. They took us down with them. So why do the bad guys deserve a government cushion?

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The House Financial Services Committee, chaired by Rep. Barney Frank, is taking a look at the bonuses being paid to AIG employees.

WASHINGTON (CNN) - Outraged House Democrats are scrambling to figure out what, if anything, they can do to recoup the $165 million in bonuses AIG awarded to employees after the company received $170 billion in federal bailout funds.

A House Democratic leadership aide and a House financial services committee aide said Congress is trying to shame AIG executives and employees into forgoing the bonuses while investigating possible legal avenues that can be used to force AIG to return the money used for bonuses.

The House financial services committee is trying to determine if Congress can force AIG to renegotiate the bonuses the company says it is legally required to give employees as dictated by contracts negotiated before it received its first infusion of bailout dollars in September, according to the committee aide.

Both aides said it is unclear what authority Congress has to force AIG to take back the bonuses. Complicating the issue is the fact that the first infusion of cash to AIG was authorized by the Federal Reserve before Congress passed the $700 billion Trouble Asset Relief Program, which included some restrictions on executive pay.

AIG CEO Edward Liddy will face intense questioning about the bonuses when he testifies Wednesday before the House Financial Services subcommittee on capital markets.

Liddy will be in the hot seat on Capitol Hill later this week.

WASHINGTON (CNNMoney.com) – Lawmakers outraged about the bailout of American International Group will get another forum Wednesday, when the company's CEO is set to go before a House panel probing the government's involvement in the embattled insurer.

Edward Liddy, the AIG chief executive, is sure to be grilled about $160 million in bonuses paid to senior employees last week.

AIG has received three bailout packages, totaling more than $170 billion, in large part because it had issued risky credit default swaps - a kind of insurance for bad loans made by banks and investment companies.

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In a letter to the White House, AIG Chairman Edward Liddy, shown here in December, vows to curb bonuses.

(CNN) - White House officials and some members of Congress reacted strongly Sunday to news that insurance giant AIG had intended to pay out $165 million in bonuses and compensation. The company has received at least $170 billion in federal bailout money.

Under pressure from the Treasury, AIG scaled back the bonus plans and pledged to reduce 2009 bonuses - or "retention payments" - by at least 30 percent. That did little to temper outrage at the initial plan, however.

"There are a lot of terrible things that have happened in the last 18 months, but what's happened at AIG is the most outrageous," Lawrence Summers, head of the National Economic Council, told ABC's "This Week."

"What that company did, the way it was not regulated, the way no one was watching, what's proved necessary, it is outrageous."

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