President Obama sought yesterday to deflect criticism of the way his Administration had handled the bailout of stricken institutions such as AIG by pushing for new powers to take over and — if necessary — close down firms that threaten to topple the world’s financial system.

Speaking at the White House after talks with Kevin Rudd, the Australian Prime Minister, Mr Obama said that the Government lacked the authority it had with banks to take over other institutions like AIG, deemed “too big to fail”, but which had cost the taxpayer more than $180 billion (£123 billion) in federal bailouts.

“You can end up with the situation that we’ve been in, with an institution that poses a systemic risk, but a lack of capacity to shut it down,” he said.

Global financial reforms will be at the top of the agenda when Mr Obama meets G20 leaders in London next week and yesterday he added that he hoped “it doesn’t take too long” for Congress to approve new regulations. His comments echoed those of the Treasury Secretary Tim Geithner who said: “AIG highlights broad failures of our financial system. We must ensure that our country never faces this situation again.”

The wave of anger that greeted disclosures last week that AIG was distributing $165 million in bonuses to its employees has shaken Mr Obama’s infant Administration and the position of Mr Geithner in particular.

The New York Attorney-General Andrew Cuomo said this week that 15 of the 20 employees who received the biggest bonuses from AIG had agreed to return them. Mr Geithner said there were other financial companies besides AIG that had taken bailouts and then paid big bonuses to their executives. Asked for a list of those companies he was non-committal, replying: “I’m not going to hide the ball. I’ll reflect on the suggestion.”

The Treasury Secretary said that the current climate of public outrage over the behaviour of financial institutions would complicate an expected effort by the Administration to secure congressional backing for a further bailout fund worth as much as $750 billion. “We recognise it will be extraordinarily difficult,” he said.

Sitting alongside Mr Geithner at the congressional hearing was the Federal Reserve Chairman Ben Bernanke, who disclosed that he had considered taking legal action to prevent AIG from paying millions in bonuses but his lawyers had advised him against it.

Asked if the firm would have been treated any differently if the new powers being sought by the Administration had been in place, he replied: “It could have been taken into receivership or conservatorship. The bonus issue would not have arisen.”

Mr Obama was holding his second prime-time White House press conference last night, when he was expected to shore up his economic agenda against attacks from Republicans and a growing mood of public anger.

It is part of a media blitz by the President, who has also done interviews on The Tonight with Jay Leno show and 60 Minutes in the past week designed to maintain a direct connection with voters.

“I think that the President believes a continued dialogue with the American people about where we are and where we’re going is necessary, said the press secretary Robert Gibbs.

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