Lawmakers questioned Geithner's leadership on AIG and whether he was truthful in saying he learned about the bonuses in March. Several said Geithner should have known, and that Treasury should have done more after the March news to recover the bonus money.

Geithner "failed to know what he should have known, failed to do what he should have done, and failed to give us transparency" by cooperating fully with Barofsky, said Rep. Darrell Issa of California, the committee's top Republican.

Barofsky agreed that Treasury might have done more to recapture the money, millions of which went to employees in the unit whose bets helped sink the company.

The report said that Kenneth Feinberg, the special master for executive compensation, "has informally advised AIG not to pay the full $198 million" employees expect to receive.

Feinberg is locked in negotiations with the seven companies that received the most expensive taxpayer bailouts. AIG's was by far the largest. To secure its bailouts, AIG argued to Treasury that its failure would doom the broader financial system.

The company is talking to Feinberg about matters "including future payments to employees of AIG Financial Products," the division whose bets helped sink the company, spokeswoman Christina Pretto said in a statement Tuesday. Employees have until the end of the year to return voluntarily some of the bonus pay they received in March, she added.

Barofsky's report recommends that Treasury work closely with officials from the New York Fed, which is funding parts of the AIG bailout. It also suggests Treasury improve oversight of companies that it owns, including reviewing compensation programs before buying major ownership stakes in companies.

In a written response, Herbert M. Allison Jr., Treasury's assistant secretary in charge of the government bailout, said the department is implementing the guidelines and "has no present intention" of buying another financial company.

"We welcome your comments and suggestions as Treasury continues to strengthen oversight of financial institutions" receiving government assistance, Allison wrote.