President Obama said that his administration is exploring "every legal avenue" to try and block bonuses to be paid to executives from AIG, asking how they could justify the "outrage" to taxpayers who now own most of the company.

"This is a corporation that finds itself in financial distress due to recklessness and greed.
Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay," Obama said to a crowd of small business owners this morning.

Obama said that Treasury Secretary Timothy Geithner hopes to use the leverage that the Treasury has because of its ownership stake in AIG to resolve the controversy. Geithner is working with AIG CEO Edward Liddy, who Obama made sure to mention took the job "after the contracts that led to these bonuses were agreed to."

Obama interrupted his remarks at one point to cough, then joked that he was "choked up with anger" over the bonuses.

"I think Mr. Liddy and certainly everybody involved need to understand, this isn't just a matter of dollars and cents. It's about our fundamental values," he said. "All across the country, there are people who work hard and meet their responsibilities every day, without the benefit of government bailouts or multi-million dollar bonuses. ... All they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules."

Geithner, who joined Obama for the announcement in the East Room, had a stern message of his own, but for U.S. banks, as he urged them to loosen up credit to help small businesses.

"Many banks in this country took too much risk, but the risk now to the economy is that you will take too little risk," he said. "You need - you banks - need to make the extra effort to make sure that good loans are getting to credit-worthy small businesses in order to serve the larger public good of moving this nation to recovery. And given the role that many banks played in causing this crisis, you bear a special responsibility for helping America get out of it."