WASHINGTON–Disclosure that American International Group paid more than $450 million in bonuses early last year to retain employees at its troubled Financial Products Group is stirring more outrage against the company on Capitol Hill.

But, a spokesman for AIG defended the action, saying it was necessary to keep the business running after the executive in charge was dismissed in March, and long before the company’s dire need for a federal bailout became necessary. Moreover, she said, it is a contractual obligation.

It comes as financial services companies are under renewed fire following New York state officials’ release of tax records indicating that financial executives working in the state were paid $18 billion in bonuses last year even though the industry reported billions of dollars of losses and some firms like AIG required government bailouts in order to stay in business.

Yesterday, President Obama issued a statement reacting to the disclosure from New York Comptroller Joseph DiNapoli by saying, “It’s the height of irresponsibility. It is shameful.”

In a statement late Wednesday, Rep. Paul Kanjorski, D-Pa., influential chairman of the Capital Markets Subcommittee of the House Financial Services Committee, expressed “outrage” at AIG.

“Despite AIG’s fall from grace, it still just does not get it,” Rep. Kanjorski said. “Fortunately, there is a new sheriff in town, and the Treasury Department must work to fix this problem promptly,” he continued, adding that he has the support of Rep. Barney Frank, D-Mass., chairman of the full committee, to convene hearings to examine the issue.

He said the reports of bonuses, totaling about $450 million, paid to 400 AIGFP workers based in London and Wilton, Conn., “is simply outrageous.”

“We are in extremely difficult economic times, and AIG knows this from personal experience,” Rep. Kanjorski said.

“I have already personally told AIG’s chairman [Edward M. Liddy] that this decision is mind boggling and wrong. AIG needs to reverse course,” he added.

“AIG should be at the beck and call of the taxpayers, but instead it continues to play games behind our backs,” he charged.

Rep. Elijah Cummings, D-Md., who also has severely criticized AIG retention bonuses as well as its decision to wine and dine its agents at expensive resorts after accepting funds from the government, met with AIG officials in Washington, D.C. about 10 days ago, according to Christine Pretto, chief AIG spokesman. She said they had a “good, cordial meeting.”

A spokesman for Rep. Cummings, Jennifer Kohl, did not respond to a request for details concerning the meeting.

Christina Pretto, chief spokesman for AIG, said the retention program was undertaken after the dismissal of Joseph Cassano, the head of the AIGFP unit, in March.

Mr. Cassano was let go after the company disclosed a $5.29 billion net loss.

The financial products business was founded in 1987 by ex-employees of Drexel Burnham Lambert, the securities firm that helped popularize “junk-bond” investing before it collapsed.

“We adopted this contractual retention program nearly a year ago and disclosed it in our 2008 quarterly [Securities and Exchange Commission] filings,” Ms. Pretto said.

At that time it was clear, she said, “given the market environment, that we would need to retain employees to manage the complex issues arising in our Financial Products business, which we are now unwinding.”

Ms. Pretto said AIG is eliminating nearly $800 million of deferred compensation to AIGFP employees due to the unit’s losses.

“Ensuring we have the right people to unwind this complex business–including $2.1 trillion of notional swap transactions as of the end of 2007–efficiently for the benefit of taxpayers remains a key company goal,” she said.

She said the company is “committed to full transparency” and that, in consultation “with our government stakeholders, we will continue to honor our legal obligations while exercising prudent financial practices to ensure we accomplish our main goal: repaying the government loan as soon as possible.”