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President Obama and his top economic advisers scrambled to calm a nationwide furor on Monday over bonuses paid at the American International Group, even as administration officials acknowledged they had known about the issue for months. One day after the economic advisers insisted that their hands had been tied by contracts requiring the payments, Mr. Obama ordered the Treasury Department to ''pursue every single legal avenue to block these bonuses'' and make the American taxpayers whole. [ABSTRACT FROM PUBLISHER]

The government announced Monday that it would accept a system of Islamic law in the Swat valley and agreed to a truce, effectively conceding the area as a Taliban sanctuary and suspending a faltering effort by the army to crush the insurgents. The concessions to the militants, who now control about 70 percent of the region just 100 miles from the capital, were criticized by Pakistani analysts as a capitulation by a government desperate to stop Taliban abuses and a military embarrassed at losing ground after more than a year of intermittent fighting. About 3,000 Taliban militants have kept 12,000 government troops at bay and terrorized the local population with floggings and the burning of schools. [ABSTRACT FROM PUBLISHER]