NEW YORK (Bloomberg) - Kenneth Feinberg, the government's paymaster for bailed-out companies, will allow insurer American International Group Inc. (AIG) to pay retention bonuses to executives after US regulators emphasised the need to keep the staff.

Mr. Feinberg concluded that the 2009 awards should be paid after AIG refused to trim them and Federal Reserve Bank of New York and Treasury Department officials offered opinions on the bonuses, he said in documents released on Friday. Mr. Feinberg ruled on compensation for the 26th through 100th highest-paid workers at AIG and three other firms that got the biggest US bailouts.

"Discussions with AIG officials did not lead to an agreed upon restructuring of these contracts," Mr. Feinberg wrote. Employees getting the retention awards were "deemed by the Federal Reserve Bank of New York, the Treasury and AIG itself to be particularly critical to AIG's long-term financial success".

AIG was rescued last year with a bailout that swelled to $182.3 billion, placing the company under the jurisdiction of Mr. Feinberg, the Obama administration's special master for executive compensation. CEO Robert Benmosche, who must retain staff in AIG units that will be sold to repay US bailout loans, has said negotiations with Mr. Feinberg were frustrating.

Mr. Feinberg ordered a $500,000 cap on base salaries at the four companies except for 10 employees considered essential, the paymaster said on Friday in a Bloomberg Television interview. He said managers at New York-based AIG were granted exemptions and declined to specify the number.

"In those cases where the Federal Reserve and Treasury had an interest, they made it very clear to me, they urged me in my discretion to lift the cap for those few," Mr. Feinberg said in the interview. "AIG owes the taxpayer a huge amount of money and we want to make sure that my compensation practices take into account the need for AIG to thrive."

Among the 10 exceptions, one executive will make about $1.5 million in salary, Mr. Feinberg said. The rest will make between $500,000 and $950,000. Last week, five AIG executives threatened to leave over pay cuts. At least three of the managers retracted their threats, according to people familiar with the matter.

Christina Pretto, a spokeswoman for AIG, declined to comment. Deborah Kilroe, a New York Fed spokeswoman, had no immediate comment. Meg Reilly of the Treasury did not immediately return calls seeking comment.

In October, Mr. Feinberg set pay for the top 25 executives at companies that got "exceptional" government assistance from the $700 billion Troubled Asset Relief Program.