Connecticut State Attorney General Richard Blumenthal says Connecticut law should not be an obstacle to recouping American International Group Inc. retention bonus payments.

Blumenthal made that comment Tuesday, in response to testimony that Federal Reserve Chairman Ben Bernanke gave before the House Financial Services Committee on bonuses paid to AIG Financial Products Corp. unit employees.

Problems at the financial products unit forced AIG, New York, to turn to the federal government for help in September 2008.

Bernanke said he had asked that bonus payments to AIG Financial Products unit employees be stopped.

Bernanke said he was told that the bonuses “were mandated by contracts agreed to before the government’s intervention.”

When he asked “that suit be filed to prevent the payments… legal staff counseled against this action, on the grounds that Connecticut law provides for substantial punitive damages if the suit would fail. Legal action could thus have the perverse effect of doubling or tripling the financial benefits to the AIG-FP employees,” Bernanke testified.

“I respectfully disagree with Federal Reserve Chairman Ben Bernanke’s statement today that Connecticut law prevented a Federal Reserve lawsuit to block AIG bonuses,” Blumenthal said in a statement.

“The Federal Reserve never contacted me or my office concerning the applicability of the Connecticut wage law to the AIG bonuses,” Blumenthal said. “If the Fed had called, we would have given the green light for litigation blocking these unconscionable bonuses. My office has reviewed AIG’s claim and state law, concluding that these bonuses were not wages under the Connecticut Wage Protection statute. AIG used this joke of a justification to squander $218 million of taxpayer money, rewarding monumental failure.”

Blumenthal said Monday that his office was in discussions with AIG to set the terms and timing of their employees to appear as potential witnesses at a bonus inquiry hearing before the Connecticut General Assembly Banks Committee.

“We are mindful of security and safety concerns, seeking to be responsive and responsible in addressing them,” Blumenthal said. “We cannot comment at this point on who may testify.”

If AIG fails to cooperate, “we will take appropriate and aggressive action to enforce these lawful subpoenas,” Blumenthal said. “The public has a right to know facts relevant to bonuses made from taxpayer funds by a company that would not exist without a [U.S.] taxpayer bailout.”