March 2 (Bloomberg) -- American International Group Inc. Chief Executive Officer Edward Liddy said the revised federal bailout package will still enable the insurer to pay back “every penny” provided by the U.S.

The new terms will protect policyholders while “helping the taxpayers,” Liddy said today during a Bloomberg Television interview, adding AIG’s liquidity crunch “is behind us.” All of the outstanding loan from the Federal Reserve will be repaid, Liddy said.

AIG is counting on asset sales to help cover its debt to the U.S., which saved the New York-based company -- once the world’s largest insurer -- from bankruptcy last September. The relaxed terms of the bailout announced today give the company more time to complete those sales, with the pace depending on the stability of capital markets, Liddy said.

Liddy is trying to steer AIG toward recovery after the insurer posted the worst quarterly loss by any U.S. corporation. The loss during the last three months of 2008 widened to $61.7 billion from $5.29 billion in the year-earlier period. The insurer had to delay its plan to sell subsidiaries and ask for more U.S. help after potential buyers balked because plunging values for financial assets left some of them short on capital.

Liddy also said that former CEO Maurice “Hank” Greenberg was to blame for the company’s woes, citing AIG’s financial products unit, which sold credit-default swaps.

“The formation of the AIGFP unit, which has literally brought us to our knees, that happened on his watch,” Liddy said. “The compensation systems that have gone astray happened on his watch. I don’t think it’s as clean and simple as sometimes Hank would like to portray.”

Greenberg couldn’t be reached immediately for comment.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

Last Updated: March 2, 2009 11:00 EST