UPDATE 2-AIG's Benmosche "totally committed" to company

* AIG CEO says he is frustrated by pay constraints

* Newspaper says he is considering stepping down (Changes sourcing)

NEW YORK, Nov 11 (Reuters) - American International Group Inc (AIG.N) Chief Executive Robert Benmosche said on Wednesday he remains "totally committed" to staying at the company, countering an earlier report that he was considering stepping down.

In a letter to employees obtained by Reuters, 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.

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. [ID:nN06174086]

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

The Wall Street Journal reported that Benmosche was so frustrated that he told the company's board last week he was considering stepping down. The newspaper 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. (Reporting by Steve Eder in New York and Ajay Kamalakaran in Bangalore; editing by Valerie Lee, Andre Grenon, Leslie Gevirtz)