Washington - In a conciliatory gesture, some AIG employees have offered to return some of the 165 million dollars in bonuses at the centre of public ire over the government financial bail-out programme, the company's head said Wednesday.

Edward Liddy, appointed by the US government in September to head the floundering American International Group (AIG), revealed the gesture in testimony before a House Financial Affairs subcommittee.

The US Congress and administration of President Barack Obama are trying to figure out how to block future bonus payments - a commitment estimated at 1 billion dollars - and recover the 165 million dollars that were paid on Friday.

AIG is being kept afloat by an estimated 180 billion dollars of government money intended to help unblock the freeze in credit markets, and defenders of the 165 million dollars in bonuses say they represent only a small fraction of the total.

But Obama and others have said the payments violate American values by rewarding incompetence - which they say is what happened when AIG paid bonuses to traders who insured and traded in financial instruments that helped trigger the global credit crisis.

Liddy said he had asked employees of the financial products unit at the heart of much of the problem to "step up and do the right thing" by offering to return at least half of all bonuses in excess of 100,000 dollars.

"Some have stepped forward and offered 100 per cent," Liddy said. "We are working to ensure the highest level of employee participation in the days ahead."

AIG has claimed it is legally obligated to pay the bonuses, which it says are needed to retain top talent and were included in contracts before the bailout.

Liddy defended the bonuses to Congress, saying he was trying "desperately to prevent an uncontrolled collapse" of the business. He said the only way to "avoid systemic shock to the economy" was to pay the bonuses to the traders who were sorting out the malaise at the centre of the AIG crisis.

He said the financial products unit had already shown considerable progress in getting rid of the toxic assets.

"We are executing a methodical, orderly wind-down of AIG financial products, the business that caused many of the company's financial problems," he said in his statement. "We have reduced the notional value of AIG financial products' derivatives business from 2.7 trillion dollars to 1.6 trillion dollars."

Without the financial products unit employees, he warned that the US government would face an implosion of the remaining 1.6 trillion dollars, which it would also have to bail out. (dpa)