American International Group Inc. Chairman Edward Liddy is warning that AIG may need more than the $123 billion in government financing it already has to keep going while it restructures.

Liddy made the comments earlier this week during an interview on PBS.

AIG, New York, has obtained an $85 billion emergency credit line from the Federal Reserve Bank of New York and another $38 billion in government financing backed by securities owned by AIG’s life insurance units.

AIG needs the cash because AIG Financial Products Corp., London, the company’s shuttered derivatives unit, continues to face demands to post additional collateral, to back the credit default swaps it sold, Liddy says.

Normally, AIG would be selling commercial paper to raise cash, Liddy said.

AIG arranged the extra $38 billion in financing through a securities repo “because there’s no commercial paper around right now,” Liddy said.

If the credit markets continue to decline, “and we have to keep posting collateral, as it’s called in the vernacular in the industry, it’s possible it may not be enough,” Liddy said.

When the value of residential mortgages or other assets involved in AIG Financial Products credit default swap guarantee arrangements drops, “you have to make it up with something,” Liddy said. “We make it up by writing a check. We’ve had to write more and more checks to keep the bathtub full.”

Liddy said he thinks the Federal Reserve System and the Treasury Department were wise to throw AIG a lifeline, to help the company emerge from the crisis in an orderly way.

“AIG touches an awful lot of other financial companies around the world with the credit default swaps and some of the financial products which you alluded to earlier,” Liddy said. “Anyone who thinks we didn’t need the Federal Reserve as a lifesaver simply doesn’t understand the precarious nature of where we were.”

Liddy also talked about AIG’s efforts to sell assets.

“Clearly, we’d prefer to be doing this asset sale a year ago or two years ago than right now, but I think there will be plenty of excellent demand for what are really very, very good assets,” he said.

In related news, the Federal Reserve Board disclosed Thursday that AIG had borrowed about $90 billion as of Wednesday, with $18 billion being provided under the securities repo arrangement and $72 billion through the $85 billion credit line arrangement.