March 18 (Bloomberg) -- American International Group Inc. Chief Executive Officer Edward Liddy told employees that some critics of the company went too far, including a senator who suggested executives kill themselves.

“The public reaction, fanned by screaming headlines, is understandable,” wrote Liddy, who was appointed in September to run the New York-based insurer after a government rescue. Still, some criticism of the company following $165 million in bonuses to employees of the unprofitable Financial Products unit has been excessive, he said.

“A statement by a United States senator that AIG employees should consider suicide is unfathomable, especially for one of our nation’s leaders,” Liddy said in the letter, obtained by Bloomberg News. Senator Charles Grassley, an Iowa Republican, yesterday said he wants “contrition” from company executives after previously telling Cedar Rapids, Iowa, radio station WMT they should “resign or go commit suicide.”

Liddy is seeking to repay the loan portion of a $173 billion U.S. bailout and blunt criticism of AIG for paying bonuses to employees of the Financial Products unit that almost bankrupted the company. Liddy wrote in commentary published in the Washington Post today that he found the payments “distasteful” and wouldn’t have approved them if he was CEO at the time. Liddy is scheduled to testify to Congress today.

Today’s front page of the New York Post was dominated by a headline that said, “Not So Fast You Greedy Bastards,” all in capital letters.

Liddy hesitated at today’s Congressional hearing to answer requests for names of bonus recipients because of concern for their safety. He read examples of death threats that said the executives and their families should be “executed with piano wire around their necks.”

Robert Haines, an analyst at CreditSights Inc., said Liddy needs to “stem the hysteria against AIG right now” for business as well as personal reasons. “The negative sound bites about AIG at the end of the day can significantly damage the franchise,” Haines said in a Bloomberg Television interview.

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

Last Updated: March 18, 2009 16:57 EDT