Marshall Huebner is a person Zero Hedge has great respect and admiration for. The Davis Polk lawyer, in addition to having an impressive work ethic with many successful bankruptcies under his belt (Delta's 2007 emergence being a case in point: in fact, he will likely be making a repeat appearance there quite soon now that Goldman has envisioned another ramp to $200/barrel of crude), volunteers 13 hours every Sunday night as an Emergency Medical Technician - a noble dedication to his community. Marshall's dedication however is not only to his immediate community, but to American taxpayers in general: a little known fact is that Davis Polk is the official yet still formally unannounced legal advisor for the Federal Reserve. And no other company has tested Marshall's mettle more than AIG, which has been on the verge of complete financial collapse on many occasions over the past year.

AIG's collapse of course has been ruled out as an option by both the current and prior administrations, both of which observed the market's reaction to Lehman's bankruptcy and realized that one more financial failure would be the end of civilization as we know it. Readers will recall that TARP was originally envisioned as a toxic security purchase program (comparable to what the latest version of TALF has become). It took Paulson, and subsequently Geithner, no time to make TARP and the ensuing alphabet soup of programs, merely a backstop for all financial companies whose foundations were shaken as a result of AIG's failure. In essence, the fate (and progression of troubles) of nationalized AIG is the one, most critical question mark, from which all subsequent policy decisions emanate.

What does Huebner and Davis Polk have to do with this? A few days ago, Fox Business published emails it has received as part of a FOIA request to the Federal Reserve. What the email (below) indicates is that not only was an AIG bankruptcy a viable option for the Fed, but that Marshall Huebner was in fact presenting to an extensive audience of Fed members on the merits (or lack thereof) of such.


This coincides perfectly with unconfirmed rumors swirling in late January that AIG had retained TBTF law firm Weil Gotshal to advise it in advance of a bankruptcy filing.