In response, Geithner said it was necessary to pay off AIG's trading partners such as Goldman Sachs because a failure to do so would have triggered a new financial panic in the country.
He defended using taxpayer money to bail out AIG and stave off what he called "potentially catastrophic damage to the economy."
The law-makers, who are investigating $62bn in payments made in November 2008 to AIG by the Federal Reserve, questioned Geithner about why the company was allowed to pass on the bailout money to Wall Street banks which were business partners.
Critics have regarded this as a "backdoor bailout" of the banks with government funding.
Committee chairman Edolphus Towns told Geithner: "The taxpayers were propping up the hollow shells of AIG by stuffing it with money. "And the rest of Wall Street came by and looted the corpse,"
At the time of the AIG bail-out, Geithner was chairman of the New York Federal Reserve, which played a key role in rescuing the insurance giant.