Barack Obama stood squarely behind his embattled Treasury secretary yesterday as lawmakers sought to drag the administration into the political furore over bonus payments at AIG, the insurer that was rescued with more than $170bn in public money.

Mr Obama said he was “angry” that large bonuses had been paid to executives only months after AIG began receiving billions of dollars in taxpayer support. But he said that Tim Geithner, who supervised part of the bail-out, had his “complete confidence” and that the creation of a “resolution authority” with power over AIG would provide greater scrutiny of how public money was spent.

Edward Liddy, AIG's chief executive, acknowledged that the bailed-out insurance group had made mistakes “on a scale few could ever have imagined” but insisted he had no option but to go ahead with $165m (€126m, ￡118m) of bonuses that have prompted a furious backlash.