NEW YORK (Bloomberg) — Ernst & Young LLP may earn as much as $60 million advising the Federal Reserve Bank of New York on the dismantling of American International Group Inc., an increase of 50 percent from the initial agreement.

The accounting firm is billing discounted rates to the New York Fed, including $775 per hour for work done by partners or executive directors, according to Ernst & Young documents released July 17 by the Fed bank. An amendment in May said fees could be as high as $60 million after a September 2008 letter set the limit at $40 million.

"The scope of work to be performed under the agreement has expanded in light of recent restructuring and other efforts," New York-based Ernst & Young said in the May 11 letter.

AIG's bailout, expanded three times since September, is valued at $182.5 billion, including a five-year credit line. The initial rescue, a two-year credit line for $85 billion, was insufficient to stabilise the insurer as chief executive officer Edward Liddy struggled to sell assets amid the recession to raise money to repay the loan.

Charles Perkins, spokesman for Ernst & Young, one of the so-called Big Four accounting firms, declined to comment. The New York Fed's Deborah Kilroe didn't immediately return a call seeking comment.

Ernst & Young was also hired by the Fed for advice on Bear Stearns Cos., which was purchased by JPMorgan Chase & Co. last year. The firm will reap as much as $6 million, charging the same rates as on the AIG assignment, according to an April 15 letter released by the Fed.

The New York Fed will also reimburse Ernst & Young for expenses on AIG work, including travel, meals and accommodations, for a total not to exceed 10 percent of the cost of professional fees.

The Fed bank turned to banks and other firms to auction assets and manage portfolios after helping to stave off the collapse of the financial system. Morgan Stanley, the world's third-biggest stock underwriter, stands to reap tens of millions of dollars for advising the New York Fed, according to separate documents released July 17.

Morgan Stanley is guaranteed a role as global coordinator in any initial public offering of AIG units, according to documents. The bank will earn percentage fees if New York-based AIG sells any of 11 businesses, in addition to an initial $4 million payment and $2.5 million a quarter.

The IPO fees may be the most lucrative part of Morgan Stanley's arrangement. The bank may earn about $72 million on the public listing, for example, of AIG's American International Assurance, an Asian insurer to be listed in Hong Kong, according to calculations based on figures disclosed by the New York Fed.

The IPO, slated to take place next year, may raise as much as $8 billion, people familiar with the matter said in May. Deals of that size in Hong Kong have typically yielded their underwriters a total of 2.5 percent of the IPO, and Morgan Stanley, as co-global coordinator, might get about 36 percent of that amount, according to the Fed document. Deutsche Bank AG was selected as AIA's other global coordinator.