Obama's pay adviser: AIG bonuses 'outrageous' but legal

Bonus payments totaling $100 million to AIG employees from the same unit that prompted a massive taxpayer bailout are "outrageous" but allowed under the law, the Obama administration's pay adviser said Wednesday.

Kenneth Feinberg said the retention bonuses were contractual obligations agreed upon years ago, before American International Group Inc. received a $180-billion federal rescue at the height of the financial crisis in late 2008.

"These are the old grandfathered payments," Feinberg told ABC's "Good Morning America," adding: "I do not for a minute ignore the outrage out there, which I share. But the fact of the matter is we've got to abide by the law."

Feinberg said he's working to get back as much of the bonus money as possible. He said AIG employees have agreed to repay $39 million out of $45 million in previous bonuses to the U.S. Treasury.

AIG still owes the government $120.7 billion of its bailout. Feinberg said the company should make its last retention bonus payments next month.

In a statement, AIG said current and former employees had agreed to reduce their owed retention payments by $20 million.

"We believe this allows us to largely put this matter behind us," the company said.

But the Obama administration took a harder line.

Treasury Secretary Timothy Geithner told the House Ways and Means Committee Wednesday that Congress can recoup the AIG bonuses through a new bank fee in President Barack Obama's proposed budget. The fee, which would be assessed on certain liabilities of the largest firms in the financial sector, would raise about $90 billion over the next decade.