Auditors seek halt to AIG bailout

The Treasury Department should deny American International Group Inc. $30 billion in bailout funds until the company agrees to take back millions in bonuses and negotiate cheaper exits from its financial contracts, congressional auditors said Tuesday.

The Treasury and the Federal Reserve have committed more than $182 billion to save AIG, and the Treasury now owns nearly 80% of the New York company. Experts warn the insurance giant may require more money.

The government should withhold the latest $30 billion it has committed to AIG until the company agrees to “seek additional concessions” from employees and from so-called counterparties under complex financial arrangements such as credit default swaps, the Government Accountability Office recommended in its report.

The GAO also found that payouts from the $700-billion financial system bailout had nearly halted over the last two months. As of March 27, the Treasury Department had disbursed $303.4 billion, only $9.7 billion more than it had paid out by Jan. 23, at the start of Secretary Timothy F. Geithner’s tenure, the report said.

In a separate development, AIG is being investigated by 50 state insurance regulators over whether the firm violated rules governing workers’ compensation sales.

The state watchdogs may decide to fine AIG or impose other penalties after the investigation is finished in June, said Beth Dwyer, general counsel for Rhode Island’s insurance regulator.

An AIG spokeswoman said the insurer was working with a consultant hired by the regulators to resolve their review.