WASHINGTON–Treasury Secretary Tim Geithner and Federal Reserve Board Chairman Ben Bernanke today both disclosed to Congress that their agencies examined possible legal action to stop payment of the bonuses to American International Group’s Financial Products Group but retreated from the idea.

Both also said in testimony before the House Financial Services Committee that they were counseled by their legal staffs as well as AIG’s legal staff that such legal action could backfire.

At the same time, Secretary Geithner said he is working with the Department of Justice to determine “what legal avenues may be available to recoup retention bonuses that have already been paid.”

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