He said no one in his administration created the AIG contracts or approved the bonuses that have generated such a furious public and political backlash. But he added, “Ultimately, I’m responsible. I’m the president of the United States . . . . The buck stops with me.”

Obama said his administration is “exploring every possible avenue, as is Congress, to see what we can do” to recoup the bonus money for the taxpayers. But his primary concern, he said, is “to make sure we never put ourselves in this position again.”

He said he and his economic team are working with Frank on legislation that would give the government “tools to prevent ourselves from getting in a situation where an AIG can pose such enormous vulnerabilities to the system as a whole.”

Obama also said the AIG bonuses are part of a culture of greed that must be countered.

“People are rightly outraged about these particular bonuses, but just as outrageous is the culture that these bonuses are a symptom of that have existed for far too long; a situation where excess greed, excess compensation, excess risk taking have all made us vulnerable and left us holding the bag,” he said.

In the remarks he had prepared to deliver to the panel, Liddy had said that while he found some of the millions of dollars in bonuses AIG handed out “distasteful,” there was little the company could do to prevent them.

“We have to continue managing our business as a business — taking account of the cold realities of competition for customers revenues and for employers,” Liddy said. “Because of this, and because of certain legal obligations, AIG has recently made a set of compensation payments, some of which I find distasteful.”

Liddy was expected to feel the brunt of lawmaker anger at his company.

“Something is seriously out of whack, and AIG needs to fix it now,” said Pennsylvania Democrat Paul E. Kanjorski , the chairman of the panel holding the hearing. “We face the most challenging economy since the Great Depression. Many have made personal sacrifices to survive these difficult times. AIG and its employees should do the same.”

Targeted Taxes

Liddy’s appearance comes a day after lawmakers on both sides of the Capitol rushed to draft legislation to recoup the bonuses. Lawmakers in the Senate and House have begun writing a plan that would impose an excise tax on AIG and the bonus recipients.

Sen. Max Baucus , D-Mont., the chairman of the tax-writing Senate Finance Committee, and ranking Republican Charles E. Grassley of Iowa said Tuesday evening that their bill would place a 35 percent excise tax on AIG for its bonus costs and a 35 percent tax on the bonus income of recipients. Combined with regular tax levels, that should allow for the recovery of nearly 100 percent, Baucus said.

The Senate proposal also would impose a 20 percent surtax on any deferred compensation over $1 million annually. The bill would apply to companies that have received federal bailout money or companies in which the federal government has an equity stake. It would apply to all payments from Jan. 1, 2009, forward.

Meanwhile, House Ways and Means Chairman Charles B. Rangel , D-N.Y., said the House will act this week on tax legislation aimed at bonuses paid not only by AIG but by other bailout recipients in 2009. The House bill is expected to propose as much as a 90 percent tax on bonuses given to individuals.

Rangel said the bill would apply to companies that received more than $5 billion in bailout money, plus Fannie Mae and Freddie Mac. Under those limits, the measure would apply to about a dozen companies, he said.

The House Rules Committee scheduled a Wednesday afternoon meeting to pave the way for consideration of such a tax bill under suspension of the rules, an expedited procedure that bars amendments and requires a two-thirds vote for passage.

Treasury Secretary Timothy F. Geithner sent a letter to Democratic and Republican leaders Tuesday night in an effort to calm the anger. In the letter, Geithner elaborated on Treasury efforts to recover the money, including taking $165 million — the amount of the bonuses — out of the $30 billion the government most recently committed to the company. Treasury will also attach tougher conditions to the remaining funds, he said.

But with the government owning an 80 percent stake in the company, few in Congress — and throughout the country — appear ready or willing to move on. Liddy appeared keenly aware of the public anger.

“Mistakes were made at AIG on a scale few could have ever imagined possible,” Liddy said in his prepared testimony.

House Republican Conference Chairman Mike Pence , who opposes any bailouts of financial firms, said Democrats will find a receptive audience among his members for moves to roll back AIG bonuses.

“I can assure you that House Republicans, the majority of whom voted not once but twice against Wall Street bailouts, will work with our colleagues to reverse and prevent any use of bailouts for bonuses, past, present or future,” Pence said.

House Republicans announced a set of budget principles that call for an end to bailouts for any financial firm.

“We welcome the new-found skepticism in the Democratic leadership and the White House about bailouts. But we ought to go all the way and say no more bailouts,” he added.

Asked if Geithner should resign, Pence and Rep. Peter Roskam , R-Ill., who sits on the Ways and Means Committee, criticized him, but wouldn’t say if he should leave.

Roskam said the AIG bonus disclosures are a serious problem for the Obama administration. “They either knew and didn’t disclose it or they didn’t know,” Roskam said. “Either way they have a serious problem.”

Richard Rubin contributed to this story.