American International Group Inc Chief Executive Robert Benmosche said he and the company's board are frustrated about restrictions on pay and are in discussions with the U.S. government about them, according to an employee letter obtained by Reuters.

Benmosche said compensation restraints present a barrier that stands in the way of restoring AIG's value.

Wall Street Journal reported that Benmosche is so frustrated that he told the company's board last week he is considering stepping down. The Journal cited people familiar with the matter.

The giant insurer's chief executive said in his letter that he is particularly concerned with the pay of the company's top 100 executives, which are under the purview of Kenneth Feinberg, the U.S. government's pay czar.

Benmosche told AIG directors that he was done but agreed to think it over when they reacted with shock, the people told the paper.

AIG, which has received up to $180 billion of federal aid, including more than $80 billion in loans, and is now 80 percent-owned by U.S. taxpayers, posted its second straight quarterly profit last week, helped by a recovery in the value of its investments.

(Reporting by Steve Eder in New York and Ajay Kamalakaran in Bangalore; editing by Valerie Lee and Andre Grenon)