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Goldman Sachs Group Inc did nothing wrong when it accepted payments to close out trades with American International Group , the giant insurer rescued by the U.S. government, Goldman's chief financial officer said on Friday.

An AIG unit and Countrywide Financial Corp, now part of Bank of America Corp , have sued each other, alleging breach of contract, over a dispute about insurance losses for subprime mortgage loans now in default.

Goldman Sachs Group Inc insists it did nothing wrong when it accepted payments to close out trades with American International Group before and after the insurer was rescued by the U.S. government last September, Chief Financial Officer David Viniar told reporters on Friday.

The U.S. House of Representatives swiftly passed a bill on Thursday to recoup controversial bonuses paid to American International Group Inc as Treasury Secretary Timothy Geithner tried to calm the furor by taking responsibility.

Moving with unusual speed, the Democratic-controlled U.S. House of Representatives on Thursday approved legislation to recoup most of the $165 million in bonuses paid to American International Group Inc employees.

By Grant McCool

President Barack Obama is grappling with the AIG bonus furor by both accepting responsibility for the government's failure to head off the payments and blaming it on the big mess he inherited.

Some top employees of American International Group Inc's Financial Products group have agreed to return retention bonuses after mounting public outrage over the $165 million payout, the Wall Street Journal said.

The head of AIG said on Wednesday he was trying desperately to prevent the company from collapsing when he allowed the payment of $165 million in bonuses that have stoked widespread public outrage.

The American International Group bonus payment debacle could not have come at a worse time for a U.S. government that desperately needs to attract up to $2 trillion of private capital for its latest efforts to repair a crippled financial system.

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.

The head of AIG said on Wednesday the cold realities of competition compelled the insurer to pay $165 million in bonuses, and acknowledged that bailout-weary Americans' patience was running thin.

Some of the billions of dollars the U.S. government paid to bail out American International Group Inc stand to benefit hedge funds that bet on a falling housing market, the Wall Street Journal said, citing people familiar with the matter and reviewed documents.

The Obama administration turned up the heat on AIG on Tuesday over its employee bonuses, saying the embattled insurer will be forced to repay U.S. taxpayers before it gets another bailout of $30 billion.

Outraged U.S. lawmakers proposed a special surtax on Tuesday on millions of dollars in executive bonuses at bailed-out insurer American International Group Inc amid howls of protest over the payouts.

Outrage over bonuses to employees of taxpayer-rescued American International Group dominated a Senate Banking Committee hearing on Tuesday where other insurers were renewing a call for creation of a federal regulator.

A prominent U.S. senator has intimated that executives of the troubled insurer American International Group Inc might consider suicide, adopting what he called a Japanese approach to taking responsibility for their actions.

Anticipating restrictions on bonuses, officials at Citigroup Inc and Morgan Stanley are exploring ways to sidestep tough new federal caps on compensation, the Wall Street Journal said.

New York Attorney General Andrew Cuomo will subpoena American International Group inc for information about employees whom he said were sent bonuses March 13.

President Barack Obama voiced outrage on Monday over large bonus payments awarded to top employees of insurer AIG and ordered his treasury secretary to legally block them if possible.

President Barack Obama is renewing pressure within his administration to find legal ways to block $165 million in bonus payments to American International Group employees after the government determined last week that the giant insurer was legally bound to give retention pay to workers.

President Barack Obama moved to boost U.S. job creation on Monday by making it easier for small business owners to borrow money and by spending up to $15 billion to ensure credit is available for small business loans.

President Barack Obama moved to boost U.S. job creation on Monday by making it easier for small business owners to borrow money and by spending up to $15 billion to ensure credit is available for small business loans.

President Barack Obama voiced outrage on Monday over large bonus payments awarded to top employees of insurer AIG and ordered his treasury secretary to legally block them if possible.

President Barack Obama moved to boost U.S. job creation on Monday by making it easier for small business owners to borrow money and by spending up to $15 billion to ensure credit is available for small business loans.

Goldman Sachs and a parade of major European banks, including Deutsche Bank , France's Societe Generale and the UK's Barclays , were major beneficiaries of more than $90 billion of money paid out by AIG in the first three-and-a-half months after its bailout by the U.S. government last September.

President Barack Obama expressed outrage on Monday over hefty bonus payments awarded to employees of insurer AIG and said he directed his treasury secretary to take all legal measures to block them.

Goldman Sachs Group Inc and a parade of European banks were the major beneficiaries of $93 billion in payments from AIG -- more than half of the U.S. taxpayer money spent to rescue the massive insurer.

Bailed out insurance giant American International Group Inc used $107.8 billion dollars from September 16, 2008 to the end of the year to fulfill obligations to customers, revealing for the first time the names of the firms receiving funds.