WASHINGTON (AP) - President Barack Obama is trying to dampen a fire he once stoked, urging a more tempered response to public furor over bonuses paid to executives of the publicly rescued insurance giant American International Group.

Obama is virtually certain to use Tuesday's prime-time news conference to continue an effort that began over the weekend: cooling the anti-AIG ferocity, now that it threatens to undermine his efforts to bail out the nation's deeply troubled financial sector.

Obama's tone changed dramatically after the House voted last week for targeted taxes to take back most of the $165 million in bonuses paid to AIG executives. Many lawmakers felt Obama had encouraged their step, because he called the bonuses reckless, outrageous and unjustified.

In the White House, however, the situation seemed to be spinning out of control. Some fellow Democrats questioned the constitutionality and wisdom of the House's action. Executives of other troubled companies signaled they would not make deals with a federal government that revises agreements after they are signed.

On Sunday, Obama told CBS' ``60 Minutes'' the House's plan to slap a special tax on the AIG executives would be unconstitutional. Borrowing a line from his Feb. 24 speech to Congress, he said he would not ``govern out of anger.''

For a president who prides himself on staying unflappable and on message, it was an awkward pirouette. The political dance may be far from over as Obama continues to weigh the potency of public anger against the danger of overreacting and alienating bank executives whose cooperation is needed in the bid to get credit flowing again.

A mob can be useful in driving a political movement, ``but its usefulness tends to dissipate when you're trying to craft careful policy,'' said John Feehery, a former aide to top GOP lawmakers. After playing into the public fury over the AIG bonuses for days, Obama and his allies ``are in danger of being trampled by the mob,'' he said. ``They have to coolly explain what they're trying to do.''

On Monday, the administration said it will team with investors to initially buy as much as $1 trillion in bad assets from banks reluctant to make loans. The embattled treasury secretary, Timothy Geithner, asked for patience, saying such partnerships must proceed despite ``deep anger and outrage'' over the bonus payments.

For Obama, the challenge is to keep a pulse on the anger while giving the public time to calm down, and perhaps be distracted by other events in the coming days.

``It's tricky, and the wind shifts very fast,'' said Matt Bennett, vice president of Third Way, a pro-Democratic group. Obama quickly realized the virulence of the public's anger over the AIG bonuses and the need to respond, he said.

``But I don't think they anticipated what the House did,'' Bennett said, and Obama was wise to stop short of explicitly embracing the legislation. Now, he said, the administration may have bought enough time to let tempers cool.

``Unless something else happens that moves the story along,'' Bennett said, ``I think this wave has crested. The administration has done a good job of riding it out.''

Congressional Republicans disagree. They say Obama has contradicted himself and confused voters.

``We're getting whiplash watching the administration careen back and forth,'' said Antonia Ferrier, spokeswoman for House GOP leader John Boehner of Ohio.

Clearly the administration still sees the AIG issue as dangerous and sensitive. After the House vote last week, the administration said the action ``rightly reflects the outrage that so many feel over the lavish bonuses'' to AIG executives. But it stopped short of saying Obama would sign the bill, even if the Senate approves it.

On Monday, White House press secretary Robert Gibbs continued to be evasive. ``We will certainly evaluate whatever were to come down Pennsylvania Avenue'' from the House and Senate, he said.

His comments were more tepid than those Obama made a week earlier. Then, the president said he had directed Geithner to ``pursue every legal avenue to block these bonuses and make the American taxpayer whole.''

Some congressional Democrats are pursuing strategies that might get Obama off the hook by using bureaucratic powers - not legislation he would have to sign or veto - to rescind all or part of the AIG bonuses.

Sen. Mark Warner, D-Va., has asked the U.S. Office of Thrift Supervision to block the AIG bonuses under its power to move against a lender's actions that are deemed ``unsafe and unsound.''

The OTS says it lacks such authority over AIG because the massive federal loan, which essentially gave the government majority ownership of the company, changed the company's charter. Warner, a member of the Senate Banking Committee, has asked the office to explain and defend its conclusion.

03/24/09 04:11 © Copyright The Associated Press. All rights reserved. The information contained In this news report may not be published, broadcast or otherwise distributed without the prior written authority of The Associated Press.