President Obama’s apparent inability to block executive bonuses at AIG has dealt a sharp blow to his administration and is threatening to derail both public and congressional support for his ambitious political agenda.

Politicians in both parties expressed outrage over $165 million in bonuses paid to AIG executives, demanding answers from the president and swamping Monday’s rollout of his efforts to spark lending to small businesses.

The anger at the executives who ran their firms into the ground is blowing back on Obama, whom aides on Monday described as having little recourse in the face of legal contracts that guaranteed those bonuses.

White House press secretary Robert Gibbs, peppered with questions about why the president had not done more to block the bonuses, struggled answers on Monday. He said that government lawyers are “looking through contracts to see what can be done to wrest these bonuses from the recipients.” Obama’s aides grasped for actions that could soothe sentiment on Main Street and in Congress, where the fate of president’s agendas on healthcare, climate change and education will be decided.