WASHINGTON, US - PRESIDENT Barack Obama said the US tax code should not be used 'to punish people' and pledged to find constitutional means to redress lavish bonuses awarded by bailed-out firms like insurer AIG.

The public must understand that punishing bankers could back-fire, he said in an interview with the CBS television program '60 Minutes' broadcast late on Sunday.

Laws should not target 'a handful of individuals,' Mr Obama said after the House of Representatives last week voted to slap a 90 per cent tax on AIG-style bonuses.

'And as a general proposition, I think you certainly don't want to use the tax code ... to punish people,' he said, as top US senators expressed their own unease with the House measure ahead of a Senate debate this week.

The House bill would tax 90 per cent of bonuses paid to employees who earned more than US$250,000 (S$378,000) at firms that received more than five billion dollars in government rescue funds.

The measure won wide approval amid public outrage over news that insurer American International Group (AIG) had paid out at least US$165 million in bonuses after receiving US$170 billion in bailout funds.

People are understandably upset about the 'pretty egregious situation' posed by the bonuses handed out by AIG, Mr Obama said.

'And so let's see if there are ways of doing this that are both legal, that are constitutional, that uphold our basic principles of fairness, but don't hamper us from getting the banking system back on track.

'Now the flip side is that Main Street has to understand, unless we get these banks moving again, then we can't get this economy to recover. And we don't want to cut off our nose to spite our face.' -- AFP