-LRB- CNN -RRB- -- Insurance giant AIG will have to return to the Treasury Department the $ 165 million it just paid out in executive bonuses , Treasury Secretary Timothy Geithner said Tuesday in a letter to congressional leaders . Treasury Secretary Timothy Geithner said AIG will have to return $ 165 million in bonuses for executives . `` We will impose on AIG a contractual commitment to pay the treasury from the operations of the company the amount of the retention awards just paid , '' Geithner wrote . `` In addition , we will deduct from the $ 30 billion in assistance an amount equal to the amount of those payments . '' That would be a double payment , essentially a $ 165 million penalty on AIG for issuing the bonuses . The move comes after New York Attorney General Andrew Cuomo confirmed in a letter to Congress that this year , after receiving federal bailout money , AIG paid 73 employees bonuses of more than $ 1 million each . Watch congressional reaction to AIG bonuses '' Cuomo also wrote that 11 of the employees no longer work for the company . The largest bonus paid was $ 6.4 million ; seven other people also received more than $ 4 million each . AIG is under fire for awarding the bonuses while being kept afloat by more than $ 170 billion from the U.S. government 's financial bailout . On Tuesday , two key senators also announced a plan to impose a hefty tax on retention bonuses paid to executives of companies that received federal bailout money or in which the United States has an equity interest . Sens. Max Baucus , D-Montana , and Chuck Grassley , R-Iowa , are the chairman and top Republican on the Senate Finance Committee , respectively . They said companies would not be allowed to restructure the payments to those executives through deferred compensation to avoid the tax . Grassley and Baucus said all retention bonuses would be subject to a 35 percent excise tax for excessive compensation to be paid by the company and an additional 35 percent tax to be paid by the individual . `` Millions of Americans are losing their jobs -- millions . And to some degree , they 're losing their jobs because of actions taken by some of these firms , '' Baucus said . `` At the same time , they 're giving themselves bonuses . I mean , give me a break . What are these people thinking ? That 's part of the problem . They 're not thinking . '' All other nonretention bonuses of more than $ 50,000 would be subject to the same tax , the senators said . `` We 're trying to address what I think taxpayers would say is salt in their wounds , '' Grassley said . `` The taxpayers are bearing a great deal to get this economy going , help get these corporations turned around , and I think taxpayers are willing to help . `` But when they see the lack of sensitivity on the part of corporate directors -- by giving these bonuses and doing other outrageous things -- there 's just so much that the taxpayers of this country are going to stand for . '' The provisions would apply to bonuses paid out after January 1 , 2009 , so it would affect the AIG bonuses in question . `` We should not be here . We should not be in this position , '' Baucus said . `` AIG should not have promised those payments to retain those employees , and the Treasury should have blocked the issuance of the checks . It did not . And employees themselves should not have cashed them in . We should not be here , but unfortunately we are . '' Senior Finance Committee aides said the senators had not yet worked out whether individuals would pay income tax on the bonuses as well as the proposed excise tax , or if a combination of the two would be used . Watch why Americans are angry '' `` You 'll have to wait to see when we introduce the legislation , '' one of the aides said . `` If our bosses had made a decision , we 'd tell you what it was , '' said another . See a snapshot of facts , attitudes and analysis on the recession '' On Monday , President Obama said he planned to attempt to block bonuses to executives at ailing insurance giant AIG , payments he described as an `` outrage . '' Obama said he asked Geithner to `` pursue every single legal avenue to block these bonuses and make the American taxpayers whole . '' Obama said he would work with Congress to change the laws so that such a situation can not happen again . Watch Obama say he 's outraged by bonuses '' The president spared AIG CEO Edward Liddy from criticism , saying he got the job `` after the contracts that led to these bonuses were agreed to last year . '' But he said the impropriety of the bonuses goes beyond economics . `` It 's about our fundamental values , '' he said . iReport.com : Sound off on AIG Under pressure from the Treasury , AIG scaled back the bonus plans and pledged to reduce 2009 bonuses -- or `` retention payments '' -- by at least 30 percent . That has done little to temper outrage over the initial plan , however . Who 's insured by AIG ? '' Liddy will face intense questioning about the bonuses when he testifies Wednesday before the House Financial Services subcommittee on capital markets . CNN 's Ted Barrett , Dana Bash and Elaine Quijano contributed to this report .