A B737-500 IN CLB AT 16000 FT DECLARED AN EMER AND RETURNED FOR LANDING DUE TO #1 ENG COMPRESSOR FAILURE.

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CLBING OUT OF 16000 FT WE HEARD A LOUD BANG ALONG WITH SOME VIBRATIONS AND YAW. WE HAD A RED LIGHT ON EGT GAUGE AND #1 ENG BEGAN TO SPOOL DOWN. WE DECLARED AN EMER AND IMMEDIATELY HEADED BACK TO IAH. FO RAN THE ENG FAILURE CHKLIST. I REQUESTED ILS TO RWY 27 AND WAS GIVEN VECTORS FOR THAT. I CHKED WITH FLT ATTENDANTS TO SEE IF EVERYTHING WAS ALL RIGHT AND HAD THEM PREPARE FOR POSSIBLE EVAC. THEY SAID EVERYTHING WAS OK IN THE BACK AND PAX REMAINED CALM. WE ACQUIRED THE RWY ON DOWNWIND AND WAS CLRED FOR A VISUAL APCH. WE WERE OVERWT BY 12000 LBS FOR LNDG AND MADE A SMOOTH TOUCHDOWN. ONCE WE CLRED THE RWY EMER EQUIP VEHICLES; CHKED OVER THE ACFT AND THEN WE TAXIED TO THE GATE. AFTER INSPECTION OF ENG WE FOUND THAT THE COMPRESSOR SECTION BROKE APART. CALLBACK CONVERSATION WITH RPTR REVEALED THE FOLLOWING INFO: THE RPTR STATED THE ENG WAS A GE CFM 56-3C. THE RPTR SAID WHEN LOOKING UP THE FAN AIR EXIT DUCT LOOSE AND DAMAGED BLADES COULD BE OBSERVED. THE RPTR SAID THE FAN AIR EXIT DUCT WAS ALSO DAMAGED; MAINLY DENTED AND CUT.