Barack Obama has warned AIG he is "choked with anger" at their insistence at paying out $165 million in bonuses despite being bailed out by the government.
In a case that echoes the problems faced by the British government over bonuses at Royal Bank of Scotland, AIG said it was contractually obliged to pay its staff.
The insurer has already received $173 billion of bailout funds from the US taxpayer.
Mr Obama revealed yesterday that he had asked treasury secretary Timothy Geithner to take legal steps to stop AIG from paying the bonuses.
"Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay," President Obama said.
"How do they justify this outrage to the taxpayers who are keeping the company afloat?"
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