With few legal options available, the White House may be forced to add millions of dollars in bonus payments to the outstanding debt owed by American International Group.
Earlier Monday, President Barack Obama expressed his outrage over AIG's payment of $165 million in bonuses, and ordered Treasury Secretary Tim Geithner to take all legal measures to block them.
However, sources tell CNBC, that there are few legal options available to the White House.
A U.S. Treasury official said that the Treasury will modify a planned $30 billion capital infusion for AIG to try to recoup hundreds of millions of dollars in controversial bonuses paid by the insurer.
The Treasury is finalizing the terms of its latest rescue package for AIG, announced on March 2, and will attach new provisions to it, the official said. The company was due to pay $165 billion in employee retention bonuses by Sunday to employees of AIG Financial Products, the unit that made bad bets on toxic mortgages and credit default swaps.
The official, who spoke to Reuters on condition of anonymity, said the Treasury was considering several repayment arrangements aimed at giving the money back to taxpayers.
Many AIG Bonus Recipients Are Overseas
AIG's bonus payments ranged from $1,000 to $6.5 million, CNBC has learned. Only seven employees will receive a bonus of more than $3 million.
Although some suspect pressure may be growing for those employees who received bonuses to return them on their own free will, many of the employees who received bonuses are not American and may not care that American taxpayers are outraged over the incident.
One option being discussed is having the Treasury impose new rules on a new $30 billion loan facility to ensure taxpayers will be "made whole."
"Treasury has instruments that can address the excessive retention bonuses," spokesman Robert Gibbs said, when asked about the government's options. He declined to be more specific.
Separately, New York Attorney General Andrew Cuomo said he will issue subpoenas to get details on the bonuses. AIG failed to turn over information on the bonuses before a deadline that Cuomo set for 4 p.m. New York time Monday.