* Deputy attorney general made decision, Holder says
* Holder says he had potential conflict of interest (Adds Cole letter to AP, quotes from Reid and Holder)
By David Ingram
WASHINGTON, May 14 (Reuters) - U.S. Attorney General Eric Holder said on Tuesday that he had recused himself from the Justice Department's controversial decision to secretly seize telephone records of the Associated Press as part of a wide-ranging leak investigation.
Instead, the decision to seek phone records of one of the world's largest news-gathering organizations was made by Deputy Attorney General Jim Cole, Holder said.
The seizure, denounced by critics as a gross intrusion into freedom of the press, has created an uproar in Washington and led to questions over how the Obama administration is balancing the need for national security with privacy rights.
Lawmakers from both parties on Tuesday criticized the Obama administration's decision to obtain the AP records, with Senate Majority Leader Harry Reid calling the Justice Department's actions "inexcusable."
But in a letter to AP president Gary Pruitt, Cole defended the department's unusual action, saying it was a necessary step in a year-old criminal probe of leaks of classified information.
The probe involves information contained in a May 7, 2012, AP story about an operation, conducted by the CIA and allied intelligence agencies, that stopped a Yemen-based al Qaeda plot to detonate a bomb on an airplane headed for the United States, the AP reported on Monday.
Cole declined Pruitt's request to return the records.
"We strive in every case to strike the proper balance between the public's interest in the free flow of information and the public's interest in the protection of national security and effective enforcement of our laws," he wrote. "We believe we have done so in this matter."
Cole disclosed that investigators conducted more than 550 interviews and reviewed tens of thousands of documents in the probe before seizing the AP phone records.
Holder, speaking at a press conference on Tuesday, said he recused himself from the matter to avoid a potential conflict of interest because he was interviewed by the FBI in connection with the investigation into the unauthorized disclosure of classified information.
Holder said he did not have specific knowledge about the formulation of the subpoena for AP telephone records, but he said he does not believe the Justice Department did anything wrong.
"This was ... a very, very serious leak," he said. "I have been a prosecutor since 1976 and I have to say that this is among, if not the most serious, it is within the top two or three most serious leaks that I have ever seen," Holder said, speaking at an unrelated press conference on Medicare fraud.
"It put the American people at risk, and that is not hyperbole," he said. "It put the American people at risk. And trying to determine who was responsible for that I think required very aggressive action."
The AP has said it was informed last Friday that the Justice Department had gathered records for more than 20 phone lines assigned to the news agency and its reporters.
The records covered April and May of last year, and were obtained earlier this year, the AP said.
It described the seizures as a "massive and unprecedented intrusion" into news-gathering operations.
"There can be no possible justification for such an overbroad collection of the telephone communications of The Associated Press and its reporters," Pruitt said in a letter sent to Holder on Monday.
Reid, the Senate's top Democrat, told reporters at the Capitol, "I have trouble defending what the Justice Department did, in ... looking at AP."
"I don't know who did it, why it was done, but it's inexcusable, and there is no way to justify this," Reid said.
White House spokesman Jay Carney said on Tuesday that President Barack Obama sought to balance support for a free press with the need to investigate leaks of classified information.
"The president believes that the press as a rule needs to have an unfettered ability to pursue investigative journalism," Carney told a news briefing.
"He is also committed, as president and as a citizen, to the proposition that we cannot allow classified information, that can do harm to our national security interests or do harm to individuals, to be leaked," Carney said.
Carney reiterated that the White House was not involved in the decision to seize the AP records. (Additional reporting by Susan Cornwell, Tabassum Zakaria, Jennifer Saba, Joseph Ax, Ben Berkowitz and Mark Felsenthal; Writing by Karey Van Hall; Editing by Warren Strobel and Cynthia Osterman)
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