Andrew Cuomo, the New York attorney-general, on Wednesday said he was investigating "unwarranted and outrageous expenditures" by AIG, the stricken insurer who was rescued by the US government last month with an $85bn loan.

Mr Cuomo accused the company of making "extraordinary" expenditures on compensation, junkets and executive perks, both in the months before its near collapse and after the government extended the loan to stave off bankruptcy.

In a letter sent to AIG's board of directors, he demanded the company immediately stop any further such expenditures and recover all past "unreasonable" ones, or face legal action. Mr Cuomo said such expenditures and payments violated a New York state law.

"The party is over," Mr Cuomo said at a press conference on Wednesday. "No more hunting trips. No more luxury resorts. AIG's belief is that they have had the party and the taxpayer has the hangover. That is not going to happen."

AIG has come under widespread criticism after a congressional oversight hearing revealed this month that the group spent more than $400,000 on a retreat for life insurance agents just one week after the bail-out.

In Wednesday's letter, Mr Cuomo cited several examples of expenditures, including a cash bonus of more than $5m and a golden parachute worth $15m awarded to its chief executive in March. Martin Sullivan was AIG's chief executive at the time.

"Moreover, even after the taxpayer-funded bail-out of AIG, the company paid hundreds of thousands of dollars for luxurious retreats for its executives, including an overseas hunting party and a golf outing," he wrote.

AIG's current board had a fiduciary duty to address his demands, said Mr Cuomo, who also wants the company to provide an accounting of all executive compensation from January 1, 2007.

AIG said in a statement Wednesday that it would "fully cooperate" with the attorney-general's office, adding that the company issued a clear directive ending all activities not essential to the conduct of its business on October 10.

AIG, which recently announced a programme of asset sales to pay back the $85bn loan, was thrown another financial lifeline by the US Federal Reserve last week. The Fed agreed to provide up to $37.8bn in additional liquidity to help AIG fund its troubled securities lending operations.

Separately, Washington Mutual, the bankrupt thrift, is under investigation by federal authorities looking into what caused its banking units to be seized by government regulators and sold to JPMorgan Chase last month.

"Due to the intense public interest in the failure of Washington Mutual, I want to assure our community that federal law enforcement is examining activities at the bank to determine if any federal laws were violated,'' said Jeffrey Sullivan, US attorney in Seattle.