An American International Group Inc's board meeting is expected next week against the backdrop of Chief Executive Robert Benmosche's frustration with the U.S. government's involvement in the insurer's affairs, a source familiar with the matter said on Thursday.

But the board does not plan to take any action with respect to Benmosche when it meets next Tuesday, the source said.

The Wall Street Journal reported earlier in November that the recently installed CEO had threatened to quit, partly because he does not have discretion over pay packages for top executives. Benmosche said in a letter to employees last week that he was totally committed to seeing the company through its difficulties.

Benmosche has been frustrated with the extent of governmental oversight of the bailed out insurer, and would rather focus on improving its operations, the source said.

AIG declined to comment. The source did not want to be identified because the upcoming meeting is not public.

(Reporting by Paritosh Bansal and Lilla Zuill)