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Federal Reserve Chairman Ben Bernanke wanted to sue AIG to stop the company from handing out hundreds of millions in bonus payments over the past two weeks. But Federal Reserve lawyers advised against litigation, fearing the bank would lose the suit and allow AIG to recoup huge punitive damages. Bernanke also said the Fed knew about the bonuses last fall and warned AIG management it had “deep concern” about the payouts. “Legal action could thus have the perverse effect of doubling or tripling the financial benefits to the AIG-FP employees,” Bernanke told the House Financial Services Committee Tuesday morning. AIG told the Federal Reserve that the bonus payments were mandated by binding contracts, even those to its financial products division, which was responsible for creating the credit default swaps that contributed to the current economic crisis.