By David Clarke, CQ Staff

Senate Finance Committee Chairman Max Baucus is demanding answers from the Federal Reserve about its authority over insurance giant AIG as congressional anger grows over an expensive business event the company held shortly after the government bailed it out last month.

“I want to know who we can fire and how we can get this misspent money back, and I want both of those things to happen pronto,” Baucus said Thursday.

At a hearing earlier this week, the House Oversight and Government Reform Committee disclosed that AIG spent more than $400,000 on an event at a California resort, including $200,000 for rooms, more than $150,000 for meals and $23,000 in spa charges. It was held days after the Federal Reserve extended AIG an $85 billion line of credit Sept. 16 to keep the company from collapsing. In exchange for that loan, the government took an 80 percent stake in the company and AIG was given 24 months to pay the loan back.

The Federal Reserve announced Wednesday it was loaning AIG an additional $37.8 billion, and the company reportedly decided to cancel a second event it had planned at a different California resort next week.

“This kind of behavior is an insult to taxpayers, whose dollars are used to protect and preserve private companies,” Baucus wrote Fed Chairman Ben S. Bernanke regarding the first AIG event. “Provisions must be in place to end frivolous expenses, limit executive compensation, and protect taxpayers from unnecessary risks.”

Baucus sent Bernanke a list of questions he wants answered by Oct. 23, including what Fed employees knew about the event, what the agency is doing to investigate the incident and what control the Fed has over AIG executives’ compensation.

Baucus also asked Bernanke to provide Congress with information on the terms and conditions of the federal loans, what type of oversight of AIG the Fed is performing and why the additional $37.8 billion loan was needed.

AIG chief executive Edward M. Liddy wrote Treasury Secretary Henry M. Paulson Jr. on Wednesday seeking “to clarify the circumstances of a business event held by an AIG subsidiary,” according to a company release.

“The event, mischaracterized as an ‘Executive Retreat,’ was held by one of AIG’s insurance subsidiaries for independent life insurance agents, not for AIG employees,” the release states. “These agents were top business producers for the company, and of the more than 100 attendees, only 10 were employees of the AIG subsidiary who were there to represent their company. No AIG executives from headquarters attended. The meeting was planned months before the Federal Reserve Bank of New York’s loan to AIG.”

The event has drawn heated congressional criticism as members seek to make sure that companies receiving federal assistance during the current credit crisis are not lavishing their executives with high pay and benefits.

Rep. Elijah E. Cummings , D-Md., who sharply criticized AIG at the House Oversight hearing, welcomed the news that it had canceled the second event.

“I am somewhat relieved to hear that AIG has canceled their Ritz-Carlton conference, which was nothing less than a slap in the face of the American people,” he said in a statement.

On Oct. 3, President Bush signed into law a bill (PL 110-343) giving the Treasury Department the authority to buy up $700 billion worth of troubled assets from financial institutions in an effort to unfreeze credit markets amid concerns the economy is slipping into a prolonged recession.