Michael knew that Frankie was one of the last old timers who still held true to the old Mafia traditions of Honor. This became very clear when he brought Frankie's brother to the hearing, and caused Frankie to perjure himself.

Dont forget that Frankie was up on all kinds of charges including murder, so once he renegged on his deal with the Feds he would have gone to prison eventually. Note that when Tom came to see him, it was Frankie who asked Tom what his next move should be, whereupon Tom steered him in the right direction by assuring him that if he did the right thing hes family would be cared for.

That may have been one of the best scenes in all three GF movies.