Sullivan & Cromwell chairman Rodgin Cohen is leading a team advising AIG, while Davis Polk & Wardwell partners Bradley Smith and Marshall Huebner are advising the US Treasury and the New York Federal Bank.
The move comes after AIG received an $85bn bailout from the US Government just three weeks ago.
Under the new deal the Fed Bank of New York will seize control of $37.8bn in investment grade, fixed income securities from the insurance provider for cash.
The deal will provide additional liquidity for AIG for settling counterparty transactions.
Davis Polk and Sullivan & Cromwell have won a string of credit crunch related mandates in recent weeks, including Citigroup’s proposed $2.2bn acquisition of US bank Wachovia in which Davis Polk partners John Ettinger and Phillip Mills advised Citi and Cohen advised Wachovia on the proposed bid.