American International Group (AIG) Inc. has filed a new recapitalization plan with the Federal Reserve Bank of New York.

AIG, New York (NYSE:AIG), filed the plan to give more details about how it intends to free itself from the embrace of the federal government.

When the mortgage market crash and credit market freeze destabilized AIG’s derivatives operations in September 2008, the company first sought emergency financing from the Federal Reserve Bank of New York. The company then obtained financing from the U.S. Treasury Department. Timothy Geithner, Geithner who was president of the New York Fed when AIG sought help in 2008, is now Treasury secretary.

AIG has now raised $27 billion through asset sales and stock offerings, and it has enough cash to pay off the $20 billion balance on its emergency credit facility at the New York Fed. AIG will be using financing from the Treasury Department to buy back New York Fed preferred interests in special purpose vehicles that were used to provide additional emergency support.

In the new AIG recapitalization plan, AIG talks about how it will be separating from the Treasury Department.

When AIG is paying off the New York Fed, transactions involving the Treasury Department will cause the department’s stake in AIG to increase to 92.1% of the company’s common stock, from 79.8% today.

AIG reported in an earlier recapitalization plan filed in September that the Treasury Department would seek to make itself whole, and possibly earn a profit, by selling the AIG stock to investors.

The revised plan discloses some of the restrictions that the Treasury Department will impose while it is spinning AIG off.

The U.S. Treasury Department will have “complete control over the terms, conditions and pricing” of any AIG offering in which the departent chooses to participate until the department’s stake falls below 33% of the company’s voting securities, according to a summary of the revised plan that AIG has filed with the U.S. Securities and Exchange Commission.

The Treasury Department also will have:

- The right to choose to participate in any registered offering of AIG common stock.

- The right to make AIG conduct at least 2 registered stock offerings in any 12-month period after Aug. 15, 2011, or the date when AIG completes a primary stock offering, if the primary stock offering comes before that date.

- The right to engage in “at the market” offerings, or offerings conducted at prevailing market prices over an extended period.

AIG will have the right to raise up to $3 billion, and possibly up to $4 billion, through a registered primary offering. It can raise an additional $2 billion if events at its insurance subsidiaries lead to a liquidity squeeze.

AIG must pay the Treasury Department’s share registration expenses, and it must pay any underwriting discounts and commissions up to 1%.

Before the deal can close, the financial condition of AIG must be “reasonably acceptable to the parties,” and AIG must have outside financing commitments that are reasonably acceptable to AIG, the Treasury Department and the New York Fed.

AIG also must have achieved its 2010 targets for “de-risking” its derivatives trading unit, AIG Financial Products Corp.

Any party can terminate the deal agreement if the recapitalization is not completed by March 15, 2011.