Morgan Stanley (MS) has been named as a primary financial adviser for any initial public offerings for, or divestitures of, units of American International Group Inc. (AIG), according to documents released by the Federal Reserve Bank of New York.

The New York Fed, which has played a leading role in the government's bailout of AIG, said it paid Morgan Stanley a $4 million advisory fee along with $2.5 million each quarter. The investment bank can also bill expenses related to work done on behalf of the failed insurer.

In addition, the documents also showed that the Fed agreed to pay Ernst & Young LLP as much as $60 million for its advice relating to AIG. The accounting firm in September had a $40 million limit on remuneration for such work before it was amended in May, according to the documents.

Ernst & Young is charging $775 per hour for work done by partners or executive directors. The New York Fed will also reimburse Ernst & Young for expenses related to AIG work.

Up to $182.5 billion in federal assistance has been authorized for AIG since the company's first bailout in September, according to figures provided by the Government Accountability Office. AIG recently reduced its debt to the government by $26 billion in a deal that gave the Fed preferred shares in some of the insurer's businesses that might be spun off.

The New York Fed also said Morgan Stanley will act as a financial adviser for any sale of AIG's stock or credit default swaps by the central bank.

Though the fees paid to Morgan Stanley might be small, the investment bank is positioned to reap significant fees once it helps to spin off AIG units.

AIG said last week it will speed up efforts to take its American Life Insurance Co. unit public and pursue a stock-market listing in New York.

This comes even as AIG has recently engaged in talks with life insurer MetLife Inc. (MET) for AIG's flagship international life-insurance unit, which is known as Alico. The unit operates in 50 countries, from Japan to Europe.

In addition, AIG is also pursuing an initial public offering for AIG's American International Assurance. That IPO is widely expected to be in Hong Kong.

A sale or IPO of Alico and AIA would allow the Fed to sell its stakes in both companies and make some money.

AIG declined to comment. Telephone calls to Morgan Stanley and Ernst & Young weren't immediately returned.

-By Joe Bel Bruno, Dow Jones Newswires; 212-416-2469; joe.belbruno@dowjones.com

(Lavonne Kuykendall contributed to this report.)