President Barack Obama expressed outrage on Monday over hefty bonus payments awarded to employees of insurer AIG and said he directed his treasury secretary to take all legal measures to block them.

This is a corporation that finds itself in financial distress due to recklessness and greed, Obama said of AIG.

Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay, he said in remarks at the White House. How do they justify this outrage to the taxpayers who are keeping the company afloat?

Obama said he had asked Treasury Secretary Timothy Geithner to use the leverage the government had to pursue every legal avenue to push back against the bonus payments.

I know he's working to resolve this matter with the new CEO, Edward Liddy, who came on board after the contracts that led to these bonuses were agreed to last year, Obama said.

The president said the bonus situation underscored the need for overall financial regulator reform and said the government needed some form of resolution mechanism in dealing with troubled financial institutions, so we have greater authority to protect the American taxpayer and our financial system in cases such as this. We will work with Congress to that end.

(Reporting by Jeff Mason and David Alexander, editing by Jackie Frank)