Fed Sells Last of Crisis Investments in AIG; Total Gain $17.7 Billion

by devteam August 24th, 2012 | Share

The Federal Reserve Bank of New York</btoday marked the end of its financial involvement with American International Grouprn(AIG) which began in 2008 when the government stepped into save the companyrnfrom financial collapse.  The Fedrnannounced that it has sold the remaining securities in the Maiden Lane III LLCrnportfolio which was one of three limited liability companies created at heightrnof the financial crisis.  </p

Maiden Lane I was formed to facilitaternthe merger of JP Morgan Chase & Co. and Bear Stearns Companies, Inc. byrnpurchasing approximately $30 billion in assets from the mortgage desk at BearrnStearns.  Maiden Lane II and III werernformed specifically to alleviate capital and liquidity pressure on AIG stemmingrnfrom its securities lending program.  MLrnII involved the purchase by the Fed of $20.5 billion in residentialrnmortgage-backed securities (RMBS) from some of AIG’s insurance subsidiaries andrnthrough ML III the Fed purchased $29.3 billion in multi-sector collateralized debtrnobligations from AIG Financial Products Corp. (AIGFP) counterparties.  The Fed also extended credit to AIG at therntime of the crisis; that credit was terminated January 2011 producingrnapproximately $8.2 billion in interest and fees.</p

The sale today of the remainingrnsecurities in the ML III portfolio will result in a net gain for taxpayers ofrn$6.6 billion including $737 million in accrued interest on the Fed’s loan to MLrnIII.  ML II which was wound down inrnFebruary 2012 resulted in a net gain of about $2.8 billion.  Taken together, the total net profit torntaxpayers from the Federal Reserve’s assistance to AIG and its subsidiaries andrnfacilities was $17.7 billion.</p

WilliamrnC. Dudley, president of the New York Fed, said, “The completion of the sale ofrnthe Maiden Lane III portfolio marks the end of an important chapter-ourrnassistance to AIG-that was undertaken to stabilize the financial system in thernmidst of the financial crisis. I am pleased that we were able to achieve ourrnprincipal goal, which was to protect the U.S. economy from the potentially devastatingrneffects of AIG’s failure, while demonstrating sound stewardship of taxpayerrninterests. I am proud of and commend all of the people at the New York Fed whornworked tirelessly and diligently to get us here.”

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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