The head of AIG said on Wednesday the cold realities of competition compelled the insurer to pay $165 million in bonuses, but angry lawmakers insisted the money belonged to taxpayers and vowed to get it back.

American International Group Inc has come under intense fire from the public, politicians and President Barack Obama for accepting up to $180 billion in government aid and then handing out multimillion-dollar bonuses, but the company's chief executive, Edward Liddy, said the best hope for recouping taxpayer money was to keep AIG in business.

No one knows better than I that AIG has been the recipient of generous amounts of government financial aid, Liddy said in remarks prepared for delivery to a House of Representatives subcommittee.

We have been the beneficiary of the American people's forbearance and patience. And we are acutely aware not only that we must be good stewards of the public funds we have received, but that the patience of America's taxpayers is wearing thin, he said.

Fury over the bonuses threatens to undermine Obama's efforts to solve the credit crisis and pull the economy out of a deep recession. He has said he might have to ask Congress for money beyond a $700 billion bailout fund approved in October.

People are right to be angry. I'm angry, Obama said on Wednesday.

Many voters view the financial rescues as free handouts to wealthy executives who made bad decisions, and the fat bonuses have fueled that anger.

It is morally reprehensible and fiscally irresponsible to expect bonus money for bringing a corporate giant to its knees, said Democratic Representative Carolyn Maloney.

Another Democrat, Representative Paul Hodes, quipped that AIG stood for arrogance, incompetence and greed.

LAWMAKERS WANT NAMES

Channeling that populist sentiment, several Democrats and Republicans in Congress sought to force AIG to disclose details about the bonuses, and proposed taxing them so heavily that the recipients could wind up with nothing.

Representative Barney Frank, the Democrat who chairs the House Financial Services Committee, said he intended to ask Liddy to name those who received bonuses.

If Mr. Liddy declines to give us the names, then I will convene the committee to vote a subpoena for the names, he said. We do intend to use our power to get the names.

Separately, three Republicans asked the Senate Banking Committee to subpoena for documents related to the bonuses.

The House hearing room was filled to capacity, with more than 80 people inside and dozens more waiting outside. The line to get in was already 40 deep more than an hour before the hearing began.

Frank warned at the start that hecklers would be escorted out. The first portion of the hearing proceeded without interruption, but as lawmakers stepped out for a break, a handful of pink-clad protesters called after them.

One held a sign reading Fire Geithner, referring to Treasury Secretary Timothy Geithner, who has been a key architect of the bailouts.

Obama said he had complete confidence in Geithner, and said he was making all the right moves in fixing the economy.

The situation has put Obama in a tight spot as he tries to strike a balance between sharing the outrage and keeping his focus on the bigger issue of repairing the economy.

Some economists have warned that the bonuses could become a distraction that delays recovery efforts -- particularly if the administration concludes it needs more money from Congress.

AIG has argued the payouts were necessary to retain top employees with the specialized knowledge to dispose of $2.7 trillion in complex securities that ended up dragging the company to the brink of collapse last year.

Liddy, who was named chairman and chief executive in September, months after the bonuses were agreed, said the company had made mistakes on a scale few could have ever imagined possible.

For the AIG retention bonus contracts, see www.house.gov/apps/list/press/financialsvcs_dem/press031809.shtml (Additional reporting by Kristin Roberts, Karey Wutkowski and Jeremy Pelofsky; Writing by Emily Kaiser; Editing by Andrea Ricci)

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