This page has been archived and commenting is disabled.

Fed Rejects AIG Attempt To Repurchase Toxic Maiden Lane II Loans, Will Open Portfolio To Popular Auction

Tyler Durden's picture





 

Just as Zero Hedge first suggested when we heard about the ridiculous idea that AIG wants to buy back the Maiden Lane II loans that were among those forcing the government to effectively nationalize the insolvent company, the Fed has rejected the less than arms-length offer, and instead is opening up the portfolio of toxic loans to popular bidding. That other investors will trickle in is great, yet it is merely another confirmation that all funds are once again scrambling after yield since nobody has any hope of seeing the loans through maturity, and is merely a ploy to capture a few basis points before the current credit bubble implodes. Luckily for taxpayers, the Fed is not paying AIG a fee of a few hundred million for what Benmosche would most certainly characterize as a "stalking horse" bid.

From the New York Fed:

The Federal Reserve today announced that it has declined
American International Group’s (AIG) offer to purchase all of the
assets in Maiden Lane II LLC (MLII).

The Federal Reserve today announced that it has declined American
International Group’s (AIG) offer to purchase all of the assets in
Maiden Lane II LLC (MLII).

After careful review, the Federal Reserve Bank of New York (New York
Fed) and the Board of Governors of the Federal Reserve System (Board)
judged that the public interest in maximizing returns from any sale and
promoting financial stability would be better served by an alternative
approach to realizing value that is also more consistent with normal
market practice.

In light of improved conditions in the secondary market for
non-agency residential mortgage backed securities (RMBS), and a high
level of interest by investors, the Federal Reserve believes that
conditions are right for ML II to begin more extensive asset sales
while taking appropriate care at all times to avoid market disruption.
In light of this decision, the New York Fed has changed the investment
management objective for ML II consistent with such sales.

The New York Fed, through its investment manager, BlackRock
Solutions will dispose of the securities in the ML II portfolio
individually and in segments over time as market conditions warrant
through a competitive sales process. There will be no fixed timeframe
for the sales and at each stage the Federal Reserve will only transact
if the best available bid represents good value for the public.

Offering the Maiden Lane securities for sale individually and in
segments rather than as a single block will give a larger set of
investors opportunity to bid for the assets. The Federal Reserve
believes that this will maximize sale proceeds while also reducing the
likelihood that any one institution ends up with concentrated exposure
to these assets.

BlackRock Solutions will offer the securities for sale using the
standard bid list process in the secondary market for RMBS securities.
The bid list process involves marketing a list of securities from the
portfolio via multiple broker dealers to obtain the best available
price for each security.

Over time, the Federal Reserve will also entertain investor
inquiries to acquire specific parcels of securities where these offer
superior value, though no such bid will be accepted without being put
into competition with other interested investors. In such cases,
investors may submit offers for parcels of securities directly (without
necessarily going through a dealer.)

BlackRock Solutions is expected to circulate the first bid list sale
early next week. Inquiries relating to the sales process can be made
at ML2inquiries@blackrock.com.
In keeping with the Federal Reserve’s commitment to enhanced
transparency information will be released as soon as is practicable,
while preserving the effectiveness of the asset disposition process.

The New York Fed already publishes on its website a list of all the
securities in its portfolio. In order to allow the public to track
progress on asset dispositions, the New York Fed will provide monthly
updates on portfolio holdings and a list of the securities sold within
the prior month. In addition, it will provide quarterly updates on
total proceeds from sales, and the total amount purchased by each
counterparty. Finally, the New York Fed will provide further details
regarding these transactions, including an account showing the acquirer
and the price paid for each individual security three months after the
last asset is sold, ensuring timely accountability without jeopardizing
the ability to generate maximum sale proceeds for the public.

For more information visit Maiden Lane II LLC, including the most recent holdings report as of February 28th, 2011, vist Maiden Lane II LLC.

Contact:
Jack Gutt
(212) 720-6142
(646) 720-6142
jack.gutt@ny.frb.org

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 03/30/2011 - 17:52 | Link to Comment Muir
Muir's picture

credit bubble implodes. 

 

why?

Wed, 03/30/2011 - 17:55 | Link to Comment Golden monkey
Golden monkey's picture

Just won the race to the bottom with silver.

To collect many IOU, one will have no choice to use violence once in a while.

The only peaceful solution is the classical bailout.

 

Wed, 03/30/2011 - 18:00 | Link to Comment Muir
Muir's picture


@Tyler

 

or as you point out in 


MVOLNYE INDEX GP

"One day, very soon, more than just robotic churn, POMO levitation and short covering will drive this market, we promise."

 

same question: why?

 

If the only macro that matters is QE , why would the market not levitate indefinitely.

-

p.s. This is a serious question, not trolling

Wed, 03/30/2011 - 18:19 | Link to Comment Golden monkey
Golden monkey's picture

Even if I'm not Tyler, I'm convinced that gravity and logical are two powerful forces.

Our low volume environment, where stocks are easily pumped up, will one day reverse course.

After the pump, watch for the dump.

 

Wed, 03/30/2011 - 21:08 | Link to Comment RoRoTrader
RoRoTrader's picture

Muir has a valid question, and to reiterate why can't the market levitate indefinitely?

Just look at the coordinated intervention by BOJ and the G7.

The best analogy I can come up with having witnessed in disbelief not only the visuals of the tusnami itself, but also the impact of the follow on QE having taken on the same relative scale of the Japan tusnami, the results of which which few were probably prepared for in the context of overunning and drowning real price discovery.

Wed, 03/30/2011 - 21:28 | Link to Comment JohnG
JohnG's picture

The market will levitate as long as Ben prints.  Right into hyperinflation.  No way out at this point.

Default and reset.

Wed, 03/30/2011 - 21:27 | Link to Comment JohnG
JohnG's picture

Price discovery on the marked to fantasy toxic waste assets w/in ML.

Pop.

Wed, 03/30/2011 - 17:59 | Link to Comment TruthInSunshine
TruthInSunshine's picture

I hate going OT like this, but check out these new overhead photos coming in of Fukushima Daiichi:

http://i.dailymail.co.uk/i/pix/2011/03/30/article-1371375-0B65CDAB000005...

http://i.dailymail.co.uk/i/pix/2011/03/30/article-1371375-0B65CF58000005...

Japan nuclear 'suicide squads' paid fortunes as 'battle is lost for reactor two'

Last updated at 6:40 PM on 30th March 2011

  • Four reactors at stricken plant to be decommissioned
  • Subcontractors offered £760 a day - 20 times going rate - to brave radiation levels but some refuse
  • One expert who designed reactor says race to save reactor two is 'lost'
  • Radiation levels in sea water 3,335 times higher than normal
  • Readings are almost three times worse than last week
  • Unmanned drone photographs plant from the air amid health fear for pilots
  • American robots dispatched to help containment efforts
Wed, 03/30/2011 - 18:01 | Link to Comment williambanzai7
williambanzai7's picture

This is incredible. Even without the radiation this site is a giant hazard. Try and ask a union man to go in there...

Wed, 03/30/2011 - 18:10 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Thanks for posting, WB.

It's incredible and I can't imagine what's left to save to try and cool the reactors with in terms of infrastructure.

And then, the spent fuel...where is it?

Wed, 03/30/2011 - 18:19 | Link to Comment williambanzai7
williambanzai7's picture

I worked construction when I was in school. You ave a site that looks like that, water makes it even more dangerous because of all the mud and slipping. Those guys working in that are really acting selflessly. The money is so they don't ave to worry about their families.

But they are gonna start running out of skilled workers. That is going to be a problem...

Wed, 03/30/2011 - 18:27 | Link to Comment NotApplicable
NotApplicable's picture

Wow, seeing it from this view, it looks like there is quite a bit of damage to reactor 4 from #3's explosion.

Wed, 03/30/2011 - 18:29 | Link to Comment sabra1
sabra1's picture

isn't there a show called "flip this reactor?"

Wed, 03/30/2011 - 20:28 | Link to Comment Freewheelin Franklin
Freewheelin Franklin's picture

There goes the neighborhood.

Wed, 03/30/2011 - 21:21 | Link to Comment Bobbyrib
Bobbyrib's picture

"Even without the radiation this site is a giant hazard. Try and ask a union man to go in there..."

That's exactly the reason we need to get rid of unions!

Wed, 03/30/2011 - 23:55 | Link to Comment williambanzai7
williambanzai7's picture

I suppose we could switch to the Chinese system, which would have that site cleaned up in three months. How many dead, don't ask...

Wed, 03/30/2011 - 18:08 | Link to Comment plocequ1
plocequ1's picture

Its all subliminal....Number 9 , Number 9, Number 9, AIG, Taxpayer, Taxpayer, AIG,AIG, Taxpayer, I burried Paul

Wed, 03/30/2011 - 18:02 | Link to Comment MsCreant
MsCreant's picture

AIG theater. The corpse is animated, the strings are pulled, so that other strings may be pulled. Clever.

Wed, 03/30/2011 - 18:02 | Link to Comment williambanzai7
williambanzai7's picture

You watch, the AIG story is not over by any means. Lets see how they are looking end of summer.

Wed, 03/30/2011 - 18:09 | Link to Comment Seasmoke
Seasmoke's picture

you think the story will get worse ?

Wed, 03/30/2011 - 18:16 | Link to Comment williambanzai7
williambanzai7's picture

Yes, think about all the municipal paper and derivatives in their portfolios. Tic tic tic...

Wed, 03/30/2011 - 18:21 | Link to Comment Golden monkey
Golden monkey's picture

He doesn't think. He knows.

Wed, 03/30/2011 - 19:17 | Link to Comment williambanzai7
williambanzai7's picture

They demonstrated how they are capable of turning presumably safe investment activities into toxic tome bombs. What can insurance companies buy? Rated securities like CDOs and municipal debt...Booooom!

Wed, 03/30/2011 - 18:03 | Link to Comment Hedgetard55
Hedgetard55's picture

Thinking about throwing in my own stink bid on this shit.

Wed, 03/30/2011 - 18:19 | Link to Comment Cdad
Cdad's picture

The ZH brotherhood should flood them with bids, one penny increments.  Nothing like toxic waste in your portfolio to make you go mmmmm.  

And these criminal syndicate Wall Street banks/non bank entities will fight over this crap like it is the new Iphone...as 13% of American housing stands empty, NY,NY buildings fall into bidlessness, and strip malls are slated for prairie restoration treatment...and as the nation goes more and more jobless.

I know...let's misallocate ALL CAPITAL!  YEAH!  Let's Rumba!! [what a complete bumblefuck]

Wed, 03/30/2011 - 18:09 | Link to Comment Seasmoke
Seasmoke's picture

 i doubt there are any maidens involved in this fraud

Wed, 03/30/2011 - 18:16 | Link to Comment Pez
Pez's picture

I'd feel more confident if GoldmanSucks was there to offer a "buy" option.

Wed, 03/30/2011 - 18:19 | Link to Comment Monkey Craig
Monkey Craig's picture

After careful review, the Federal Reserve Bank of New York (New York Fed) and the Board of Governors of the Federal Reserve System (Board) judged that the public interest in maximizing returns from any sale and promoting financial stability would be better served by an alternative approach to realizing value that is also more consistent with normal market practice.

Since when do these bastards care about normal markets?

Wed, 03/30/2011 - 18:19 | Link to Comment FunkyMonkeyBoy
FunkyMonkeyBoy's picture

Who cares anymore it's all built on funny money... nothing means anything anymore thanks to your FED/Government/Wall Street cabal masters.

Slavery in double quick time and most still think they are free.

Wed, 03/30/2011 - 18:23 | Link to Comment Monkey Craig
Monkey Craig's picture

None are more enslaved than those who think  they are free.

Wed, 03/30/2011 - 18:23 | Link to Comment RobotTrader
RobotTrader's picture

Anybody wanna make a bet that this trash will be 300% oversubscribed?

Lemme guess who the buyers will be:

- Federal Reserve Bank of New York

- Bank of Japan

- People's Bank of China

Hint:  The same banks that have been buying this crap month in, month out, for the last 25 years, and dollar cost averaging into these "safe" investments....

LOL..

Wed, 03/30/2011 - 18:23 | Link to Comment Monkey Craig
Monkey Craig's picture

Tyler

will zerohedge be requesting due dilligence items from Blackrock?

best wishes

Monkey Craig

 

 Inquiries relating to the sales process can be made at ML2inquiries@blackrock.com.

Wed, 03/30/2011 - 18:27 | Link to Comment RobotTrader
RobotTrader's picture

Oh, and by the way....

Whatever slug of these Maiden Lane II assets the PBoC buys at the auction, it will be 10x larger than all the gold purchases they made in the entire 2010 calendar year.

Why is that?

Because gold pays no interest whatsoever, is way too expensive to guard and store, and getting it to China will be a logistical nightmare.

On the other hand, the Maiden Lane II assets can be purchased with paper, and will probably be able to be bought and sold electronically sometime in late 2011 on the same exchange the OTC Derivatives are traded.

And eventually some of those deadbeat borrowers will pay up, and at least the PBoC will be getting some income stream...

Heh, paper still rules over physical.....

Wed, 03/30/2011 - 21:27 | Link to Comment Bobbyrib
Bobbyrib's picture

"

Oh, and by the way....

Whatever slug of these Maiden Lane II assets the PBoC buys at the auction, it will be 10x larger than all the gold purchases they made in the entire 2010 calendar year."

Exactly gold is in a bubble! (sarcsasm).

Wed, 03/30/2011 - 18:28 | Link to Comment cheesewizz
cheesewizz's picture

03-30) 14:53 PDT WASHINGTON, CA (AP) --

The Environmental Protection Agency and the Food and Drug Administration say that very low levels of radiation have turned up in a sample of milk from Washington state. But federal officials say consumers should not worry.

The FDA said such findings are to be expected in the coming days because of the nuclear crisis in Japan, and that the levels are expected to drop relatively quickly.

Results from a March 25 milk sample taken from Spokane, Wash., show levels of radioactive Iodine-131 that are still 5,000 times below levels of concern set by the FDA, including levels set for infants and children.

The EPA said it is increasing the level of nationwide monitoring of milk, precipitation and drinking water following the crisis at the Japanese nuclear power plant.

(03-30) 14:53 PDT Washington, , United States --

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2011/03/30/state/n145310D86.DTL#ixzz1I7mJxnUP
Wed, 03/30/2011 - 18:39 | Link to Comment somethingelse
somethingelse's picture

"the Federal Reserve will only transact if the best available bid represents good value for the public."

sounds good...why don't they apply the same standards to the daily POMO?

TD/ZH has highlighted for us that the FED consisently has done the opposite.

Wed, 03/30/2011 - 19:58 | Link to Comment Fox-Scully
Fox-Scully's picture

The only reason thery are doing this is that their hands got caught in "the cookie jar" thanks to zerohedge reporting on this!

Wed, 03/30/2011 - 18:42 | Link to Comment TooBearish
TooBearish's picture

SO shites gotten so good these "toxic" assets now money good and the market needs the supply?  WTF am I missing?

Wed, 03/30/2011 - 20:51 | Link to Comment jkruffin
jkruffin's picture

The next collapse............so far that is all that is missing.

Wed, 03/30/2011 - 19:33 | Link to Comment max2205
max2205's picture

Fed is so good that now they are playing hard to get.

Wed, 03/30/2011 - 20:35 | Link to Comment Freewheelin Franklin
Freewheelin Franklin's picture

The "assets" in ML II are backed by a FRBNY loan, right? If the assets are sold for less than the loan, AIG is on the hook for the difference, right, or did something change while I was taking a piss?

Wed, 03/30/2011 - 20:52 | Link to Comment jkruffin
jkruffin's picture

Ok, it says the rejected AIG's offer to buy ALL of Maiden Lane II, so it sure looks like the FED is going to play ball and let them buy some, guaranteed. Who is to say they don't let them buy 90% of it? That wouldn't be ALL of it, then they can say they didn't lie.

 

The crooks always figure out a way to work around the red tape.

Wed, 03/30/2011 - 21:07 | Link to Comment Anonymouse
Anonymouse's picture

I can see there being plenty foolish enough to buy the crap. But I cannot see them buying it to pick up a few basis points of yield in anticipation of a coming credit collapse.

Managers will take on risk far above what they are being compensated to do, but will not buy what they know is crap as they are responsible for the investment performance, which includes loss of principal.

Unless they are planning on moving to another company anyway before the anticipated implosion (but after bonuses are paid on that current performance). Then all bets are off....

Wed, 03/30/2011 - 21:42 | Link to Comment buzzsaw99
buzzsaw99's picture

This is for public consumption. The joos will work it out behind closed doors.

Wed, 03/30/2011 - 21:46 | Link to Comment topcallingtroll
topcallingtroll's picture

at a fifty percent discount I believe the yield is around 9 to 10 percent.  I will buy that too.  Yes of course China will buy it.  So will all the other banks.  None of us will get to see it until they retranche it again and mark it up with a high commission so that the effective yield is 5 percent.

Wed, 03/30/2011 - 22:13 | Link to Comment Pez
Pez's picture

Hens are now considered capital on FOREX

Thu, 03/31/2011 - 01:57 | Link to Comment Augustus
Augustus's picture

ZeroHedge has continually suggested that the Maiden Lane portfolios were completely worthless.  Now it seems that the portfolios have value, but that the value may be greater than the purchase price.  What this reveals is that the Fed was able to take advantage of a liquidity squeeze on AIG to generate a substantial gain. 

The interest rate charged on AIG advances was about 8%, then they took over the company after stripping out the Maiden Lane assets.  Never let a crises go to waste.

The unreported end result will be that TARP will have become a profitable operation for the government.  It will help offset the spending on the O'Bama shovel ready projects.

Bailing out bank runs can be profitable.  Who Knew that?

Thu, 03/31/2011 - 02:36 | Link to Comment Urban Redneck
Urban Redneck's picture

In a loan there is no title transfer, in a repo there is a title transfer. 

I don't know how the original transaction was structured, but I would assume that it was a simple sale to the Fed and not a loan or repo.  As in either case the Fed would be violating a covenant by disposing of the collateralized asset, and any AIG liability would then be "erased". 

Treasury might be dumb enough to enter into a contract like that but I don't think the Fed is. 

 

Do NOT follow this link or you will be banned from the site!