Despite their public comments that a failure of crippled insurance giant American International Group (AIG) could sink global financial markets, U.S. government officials considered in late January and early February allowing AIG to file for bankruptcy, according to documents obtained by FOX Business.

The documents consist of emails about AIG between officials at the Treasury Department and the Federal Reserve, as well as with two attorneys from Davis Polk & Wardwell LLP retained by them, Marshall Huebner and Ethan James.

In an e-mail dated Jan. 29, Sarah Dahlgren, a senior vice president with the Federal Reserve Bank of New York, wrote a Treasury counselor, Stephen Albrecht: “Steve -- I didn’t see your name on the invite list and wanted to make sure that you knew that Marshall and Ethan were going to lead a discussion tomorrow on bankruptcy.”

“Yes, I’ll be on the call,” Albrecht responded, according to the document.

Read e-mails about AIG between the Treasury Department and Fed officials below.

In another e-mail dated Feb. 5, the subject line reads, “Conf call re AIG bankruptcy options.” Another email, dated Feb. 18, referred to AIG "bankruptcy effects."

Details of the bankruptcy discussions were not clear from the e-mails, which FOX Business obtained under a Freedom of Information Act request. But a Treasury spokesman said Friday that officials had explored “downside” options for AIG as part of “prudent planning.”

READ e-mails discussing details on AIG Project Liberty press release

By the time of the discussions, the government had already committed about $150 billion of bailout funds, loans and purchases of toxic AIG assets to prevent AIG from going under. Most of the emails were released with much text redacted.

On March 2, government officials announced a fourth, revised bailout which increased the commitment to about $180 billion.

Weigh In: Was government-intervention ultimately the best thing for AIG? Comment below

"Uncomfortable as this was, we believe we had no choice if we are to pursue our responsibility for protecting financial stability," Fed Vice Chairman Donald Kohn testified to the Senate Banking Committee three days later. "Our judgment has been and continues to be that, in this time of severe market and economic stress, the failure of AIG would impose unnecessary and burdensome losses on many individuals, households and businesses, disrupt financial markets, and greatly increase fear and uncertainty about the viability of our financial institutions."

"Thus, such a failure would deepen and extend market disruptions and asset price declines, further constrict the flow of credit to households and businesses in the United States and in many of our trading partners, and materially worsen the recession our economy is enduring," Kohn said.

The Fed first rescued AIG in September with an $85 billion emergency credit line after the company foundered amid bad bets on financial products. Some free-market proponents have argued the government should have allowed AIG to file for bankruptcy; other critics fear taxpayers may never recover some or all of their money.

See our American International Group page for the latest videos and articles on the insurer.

In testimony to the House Financial Services Committee on AIG on March 24, Treasury Secretary Timothy Geithner -- who took office on Jan. 26 -- said government officials "agreed that the collapse of AIG could cause large and unpredictable global losses with systemic consequences -- destabilizing already weakened financial markets, further undermining confidence in the economy, and constricting the flow of credit."

READ: AIG Bankruptcy E-mails

In a statement, Treasury spokesman Andrew Williams said Friday that “as a matter of prudent planning, all scenarios, including those on the downside, were explored” by government officials for AIG earlier this year.

“That was the responsible course of action,” Williams said. “The Administration is committed to the current course we are on with AIG, which offers the best prospects of protecting the taxpayers' substantial investment in AIG.”

As of Friday, AIG had not tapped the full amount of the available government support under the March 2 announcement. Last week, the company announced steps to repay $25 billion of its Fed loans through sales of two foreign life-insurance units. AIG's annual shareholders meeting is Tuesday.

“At this point, AIG's insurance operations have been stabilized, its derivatives book is being managed prudently and the gross notional exposures in that book have been significantly reduced,” Williams said. “The company has more than ample liquidity to meet its obligations as they come due and substantial progress is being made in implementing AIG's strategy for repayment of its loans from the Federal Reserve and for maximizing the return on Treasury's investment in AIG's preferred stock."

Learn more about the rise and fall of the beleaguered insurance giant here 

A spokesperson for the Fed's New York bank, which oversees AIG, declined to comment. A spokesperson for the Fed's Washington headquarters did not respond to requests for comment. An AIG spokesperson declined to comment.

Geithner had been President and CEO of the New York Fed for more than five years before becoming Treasury Secretary.

In February, media outlets widely reported that AIG retained a law firm, Weil, Gotshal & Manges LLP, to prepare a possible company bankruptcy filing should its talks with the government about additional assistance fail.

The FOIA documents obtained by FOX Business also show that:

• Participants in the revised March 2 bailout apparently gave it the code name "Project Liberty." Such code names are standard on Wall Street, given the sensitivity of firms' projects. The subject line in one email on March 1 said, "RE: Consolidated Comments on AIG Project Liberty Press Release." The March 2 bailout was designed to begin to extricate the Fed from the AIG rescue, in part by providing the company with up to $30 billion in additional TARP bailout funding from the Treasury.
• On March 10, a Treasury official learned of AIG’s executive compensation plans -- “we got some materials today” -- and told a Fed official they were “not pretty.” Earlier this year, controversy over AIG bonuses to executives and key employees triggered legislation and new rules covering pay programs at companies that received taxpayer bailout money.
• Officials were worried that the bonus backlash in Congress would discourage banks and investment firms from participating in government financial stability programs. In emails on March 20 with the subject line “Contagion,” one New York Fed bank official wrote a Treasury official, “Thought I’d pass along the first evidence of contagion from the AIG situation regarding treatment of bonuses in the House bill passed yesterday to other programs and facilities. Extremely problematic…” Another Treasury official commented to colleagues in an email later that day, “No need to respond, but below is one of a series of emails encapsulating the mood of market participants. It suggests that a particular [investment] fund no longer wants to partner with USG (United States Government), even if a program or transaction is ‘perfect.’ Some are being advised to not even respond to a survey from the Fed for fear the results will ultimately made public.” The subsequent compensation rules from the Treasury gave firms latitude in continuing some pay practices; for example, the rules largely exempted commissions from compensation limits.

EXCLUSIVE: E-mails About AIG Between Treasury Department and Fed Officials