The bonuses are going to some of same executives who brought the firm to a point of near-collapse.
Insurance giant AIG is about to hand out a $165 million in bonuses, months after collecting a $170 billion in government bailout money.
"It is outrageous. The whole situation at AIG is outrageous," said Lawrence Summers, White House Chief Economic Advisor.
The White House says most of the bonuses are written into unbreakable contracts, but Treasury Secretary Timothy Geithner urged AIG to find ways to scale back.
"He has done everything that is legally permissible for the government to do to limit the payment of bonuses," said Summers.
Lawmakers from both parties want to know more.
Mitch McConnell, Republican Minority Leader asks, "Did they enter into these contracts knowing full well that, as a practical matter, the taxpayers of the United States were going to be reimbursing their employees?"
"This is an example of people at the commanding heights of the economy misbehaving," said Representative Barney Frank, House Financial Services Committee.
The problems don't stop there. AIG now reveals that billions in bailout dollars went to pay off bad loans to big banks in Germany and France.
Meanwhile ... The Obama administration is expected to start the week by unveiling a plan aimed at helping owners of small businesses.
"We know we're doing a lot of help for banks, we're doing a lot of help for homeowners. Small business people need it, too," said Christina Romer, White House Chief Economist.
The White House says it hopes to help free up big loans that will keep small businesses afloat in these turbulent times.
The plan is also an answer to Republicans, who claim the Obama administration hasn't been doing enough to help small business owners who employ about half of all US workers.