Inquiry sought into U.S. Treasury's role in AIG bonuses

WASHINGTON (Reuters) - Sen. Charles Grassley on Wednesday called for an investigation into any role played by U.S. Treasury Department officials in a decision to award bonuses to AIG employees.

Grassley, an Iowa Republican, asked Treasury's inspector general, Eric Thorson, to look into whether Treasury officials "made any effort to forestall payments of bonuses or demanded waivers of bonuses" by American International Group Inc.

The call for an internal investigation came amid rising anger among the public and lawmakers over news that AIG spent $165 million on bonuses after taking about $180 billion in rescue money from taxpayers.

"AIG is largely funded and controlled by the U.S. government, after having incurred massive losses from ill-conceived and executed investments and transactions," Grassley said in a letter to Thorson.

"I am concerned to see taxpayer money being used to pay bonuses to employees associated with these massive problems," he added.

Grassley has taken a critical attitude toward Treasury Secretary Timothy Geithner personally, telling reporters on Wednesday that while he was not calling for his resignation now, he might do so in future.

The senator implied that Geithner, who was president of the New York Federal Reserve Bank before taking over the Treasury about two months ago, might have been too close to Wall Street firms that now find themselves in financial distress.

"I think that he's got a lot to learn, and I think we're going to learn that he made a lot of mistakes and misjudgments when he was president of the (New York) Fed in some of the things he did from that position that helped Wall Street," Grassley said.

(Reporting by Glenn Somerville and Donna Smith; Editing by Jonathan Oatis)