Instead of opting for a publicly transparent BWIC in the disposition of its Maiden Lane II assets, the Fed has once again gone opaque - long a critique of the Fed's practices which have required repeated FOIAs in the past to get some clarity on its secret bailouts and transactions - and proceeded with a private sale, without any clarity on the deal terms, in which it sold $7 billion in face amount of Maiden Lane II assets direct to Credit Suisse. The alternative of course would be the same snarling of the MBS and broadly fixed income market that we saw in June of last year. In other words, the Fed looked at the options: transparency and risk of grinding credit demand to a halt, or doing what it does best, which is to transact in the shadows, and avoid capital markets risk. It opted for the latter. As to why the Fed decided to go ahead with a deal shrouded in secrecy? "The New York Fed decided to move forward with the transaction only after determining that the winning bid represented good value for the public." "I am pleased with the strength of the bids and the level of market interest in these assets," said William C. Dudley, President of the New York Fed. Because if there is one thing Bill Dudley and the Fed knows is gauging what is in the best interest of the public... and the callorie content of the iPad of course.
Just out from the New York Fed.
New York Fed Sells $7.014 Billion in Face Value of ML II LLC Assets
The Federal Reserve Bank of New York today announced that it has sold $7.014 billion in face amount of assets from its Maiden Lane II LLC (ML II) portfolio through a competitive process to Credit Suisse Securities (USA) LLC.
The transaction was prompted by an unsolicited offer from Goldman Sachs & Co. to BlackRock Solutions, the investment manager for ML II, in January 2012, to buy a portion of ML II assets. Consistent with its March 2011 announcement regarding the disposition procedures for ML II, which allowed for these types of reverse inquiries, the New York Fed directed BlackRock Solutions to conduct a sale via a competitive process. The four broker-dealers included in the competitive process were Barclays Capital Inc., Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. The broker-dealers were selected based on their previous expressions of interest for large parcels of the portfolio and/or their participation in the ML II bid list process conducted last year.
The New York Fed decided to move forward with the transaction only after determining that the winning bid represented good value for the public. This transaction substantially reduces the ML II portfolio and loan at a desirable price. Furthermore, the transaction is consistent with ML II’s stated investment objective.
"I am pleased with the strength of the bids and the level of market interest in these assets," said William C. Dudley, President of the New York Fed.
Net proceeds from the sale will be reported as part of the portfolio’s normal reporting schedule on April 16, 2012.
As stated previously, the New York Fed, through BlackRock Solutions, will dispose of the remaining securities in the ML II portfolio individually and in segments over time as market conditions warrant through a competitive sales process, while taking appropriate care to avoid market disruption. There will be no fixed timeframe for the sales; at each stage, the Federal Reserve will only transact if the best available bid represents good value for the public.
The New York Fed publishes on its website a list of all the securities in the ML II portfolio. In order to allow the public to track progress on asset dispositions, the New York Fed provides monthly updates on portfolio holdings and a list of the securities sold within the prior month. In addition, it provides quarterly updates on total proceeds from sales, including a breakdown by counterparty. The New York Fed will also provide further details regarding all ML II 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.