Fed Back To Its Secretive Ways, Sells $7 Billion In Maiden Lane Assets Directly To Credit Suisse Without Public Auction

Tyler Durden's picture


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.

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Thu, 01/19/2012 - 14:06 | 2078505 Gubbmint Cheese
Gubbmint Cheese's picture

Faaaaah-q.. same ol shit.. just a different day.


Thu, 01/19/2012 - 14:37 | 2078599 hedgeless_horseman
hedgeless_horseman's picture



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.

How exactly do secret backdoor deals between banks and the Fed, a private bank owned by the banks, generate maximum proceeds for the public?

I am suprised this deal passed mustard with our Nation's banking regulator...oh wait...that would be the very same Federal Reserve Bank.  Nevermind.

Thu, 01/19/2012 - 14:37 | 2078642 trav7777
trav7777's picture

this is fucking BULLSHIT.

I BID ONE DOLLAR on this stuff and they didn't accept my bid!  My bid represented a markup to real market price of these assets of at least one million and probably in excess of one BILLION times!

I am personally pissed off as hell about this.  Either the Fed is criminal or they didn't see the minus signs in front of all the banks' bids.

Thu, 01/19/2012 - 14:49 | 2078679 fockewulf190
fockewulf190's picture

As George Carlin used to say "it's a big club, and you and I ain't in it!".

Thu, 01/19/2012 - 16:45 | 2079164 metastar
metastar's picture

It is BS. Our whole monetary and political are a cruel joke designed to victimize the public.

Thu, 01/19/2012 - 14:07 | 2078507 CrimsonAvenger
CrimsonAvenger's picture

I imagine that President Paul's first act will be to order a remote-controlled nut vise and have it installed under Bernanke's desk.

Thu, 01/19/2012 - 14:43 | 2078658 SheepDog-One
SheepDog-One's picture

'President Paul' the guy who came in 3rd and 4th place so far? So when does he rocket up to the top spot?

Thu, 01/19/2012 - 14:50 | 2078684 SilverIsKing
SilverIsKing's picture

After the election in November when those who didn't vote for him realize that they fucked up.

Thu, 01/19/2012 - 16:50 | 2079181 metastar
metastar's picture

They didn't realize after voting for Bush and they didn't realize after voting for Obama.

The people must be made to realize now.

Fri, 01/20/2012 - 10:23 | 2080842 Imminent Crucible
Imminent Crucible's picture

If they haven't "realized" by now, there's no making them. All the realizing gets done after the train wreck. Sorry about that.

Sat, 01/21/2012 - 04:02 | 2083677 Mentaliusanything
Mentaliusanything's picture

Ron Paul does not have a face - all media coverage around the World ignores him. I have heard zip of what he has spoken of. At best you now see his face for 1 second. What is going on ... If Gingrich is the best the repugs have to offer then its all over red rover. That man is a retrograde 100 % retarded money grubbing, lying, lazy, moral bankrupt with a passion for money and power and a beltway champion of giveme-giveme.

In essence "down under" we have a saying - this is an Election a cattlemans threelegged, one eared, casterated dog could win.

But then again Obummer has a nice smile and a good voice.

Ron Paul ........ who is he.(your last fucking chance Mate)

I doubt Old Abraham L would have a snowballs chance in hell as well.

Richest win in the Old US of Hay (sadly)

Thu, 01/19/2012 - 15:47 | 2078935 fockewulf190
fockewulf190's picture

After he nukes the republican party and makes a third party run. Once the American public see the choices they have: an incompitent multi-trillion dollar nothing to show for deficit plagued debt laden one termer, a status-quo my turn flip flopping shiny teeth plastic haired PAC backed rich boy, or a stead fast US first non interventionist rad spending cutter ala Shopshire Slasher constitutionalist libertarion patriot, they will choose the wheat and throw away the chaff.

Ron Paul or bust!

Thu, 01/19/2012 - 15:54 | 2078967 pods
pods's picture

The amerikan public can be counted on doing exactly what the little electric box on the wall tells them. Well, they will do 1 of the 2 approved choices.

Love the Butcher Bird, BTW!


Thu, 01/19/2012 - 16:18 | 2079032 RockyRacoon
RockyRacoon's picture

It ain't about how he places in Podunk primaries.  It's about how many pledged delegates he has at the Convention in August in Tampa.  Always look behind the curtain.  No 3rd party shenanigans are needed.


Fri, 01/20/2012 - 10:26 | 2080854 Imminent Crucible
Imminent Crucible's picture

"Always look behind the curtain"---at the nameplate on the voting machine. Ron Paul will never get elected as long as the vote is tabulated electronically.  They didn't buy all those expensive Diebolds for nothing.

Thu, 01/19/2012 - 16:49 | 2079177 metastar
metastar's picture

Paul will never rocket anywhere so long as votes are counted in secret and electronic voting (i.e. trash compactors) machines exist.

Still I am committed to the cause and hope to wake others to the farce that is our government.

Thu, 01/19/2012 - 16:20 | 2079059 fockewulf190
fockewulf190's picture

Nah, his first job will be a short hop to Fort Knox, order up a company of troops to the vaults, have them cracked open, and say "start counting boys!".

Thu, 01/19/2012 - 14:07 | 2078509 JamesBond
JamesBond's picture

Value for the pubic bitchez

Thu, 01/19/2012 - 14:07 | 2078510 Captain Kink
Captain Kink's picture

So, why the sudden interest on the street in MBS?  Remember, the Squid initiated the request for bids by making an unsolicited offer.  I bet this means the Fed has tipped its intention to buy mortgages via QE3.  Announcement by March?

Thu, 01/19/2012 - 14:09 | 2078512 Tyler Durden
Thu, 01/19/2012 - 14:18 | 2078521 Captain Kink
Captain Kink's picture


My favorite way to own crappy mortgages is via DMO. (The fund is 1/3 invested in PPIP and throws off 9%)

Thu, 01/19/2012 - 14:30 | 2078618 dcb
dcb's picture

good observation, now the fed can buy it back at a premium from the people they just sold it too. hope thyat will of course get known in puiblic, but it won't.

Thu, 01/19/2012 - 17:02 | 2079194 Assetman
Assetman's picture

Okay, Tyler... let me see if I'm following:

The Fed gets an unsolicited bid for $7 billion face value of totally crap securities under Maiden Lane from Goldman.  Then under the dark of night a private auction is conducted among the private club of primary dealers and kept out of the public eye.

So... we see here that Credit Suisse "wins".  Of course, the likely winning bid is now where close to face value... right?

Let's say that Credit Suisse gets these $7 billion face value assets for, say... $3 billion.

If we get to the point where the Fed is back to monetizing crappy MBS again (the way Bill Gross believes... seemingly hand over fist)-- can we assume that the Fed could go right back and buy the MBS they just auctioned from Maiden Lane for $3 billion (hypothetically)? 

I ask, because we all well know that the Fed has earned a very nasty reputation for buying worhtless things for face value (or above face value).  In theory, may it not be possible that Credit Suisse sells back, say $1 billion in MBS at face value to the Fed... and bought it for only $400 millions weeks before?  From the very same counterparty?

If that is the case, I really do want to be a part of the Big Boy's Club. 

Thu, 01/19/2012 - 14:15 | 2078543 Eireann go Brach
Eireann go Brach's picture

Can't see the benefit of applying anythign towards mortgage rates these days, because Jesus christ they are basically at 1%, and people do not want to buy and of course no one can refinance. As useless as sending a bunch of nuns off to get a boob job!

Thu, 01/19/2012 - 14:24 | 2078581 Captain Kink
Captain Kink's picture

I just got one at 3.8%.  I think that the point will be that the Fed "has your back" and that they will drive down mortgage rates even lower, to "stimulate housing demand".  The problem is that this will prolong the apathy of would be buyers as they feel rates will go lower and stay low for a very long time.  It will, however, pump the banks earnings and balance sheets... 'nuff said.

Thu, 01/19/2012 - 14:47 | 2078676 trav7777
trav7777's picture

low rates don't create demand among the jobless.

I might have income now, but fuck me if I am going into a 30-year obligation on an asset for which I simply don't see the income growth to support present pricing.

Thu, 01/19/2012 - 14:57 | 2078714 Captain Kink
Captain Kink's picture

Yes, another reason that it won't work--pushing on a string.  I don't know how much further prices would need to fall to make it CHEAPER to buy than rent.  The housing market will continue to slide until it is actually significantly cheaper to own, IMO.  Moreover, when inflation regains prominence as a major concern in the MSM, (and when it triples today's level, MSM will not be able to ignore it), it will cause anyone with the where-with-all to go out and get a mortgage.  The best defense against inflation (after PMs) is debt.

And Trav, I would not advocate any purchase that would require income growth to make it feasible. 

Thu, 01/19/2012 - 15:08 | 2078778 nowhereman
nowhereman's picture

You need to take into consideration the fact that, in the current situation, you can't even be sure that you own the title once you've plunked your money down.

They've screwed the pooch on this one, and as long as they refuse to deal with the elephant in the room, (MERS) real estate is a suckers game right now.

Thu, 01/19/2012 - 16:15 | 2079034 MachoMan
MachoMan's picture

There are an incredible amount of properties out there that never got caught in the MERS mess...  I just bought one...  The thing to worry about isn't title so much as taxes...

I'll also say that, in my neck of the woods, the cost to buy is significantly less than the cost to rent.  The problem of course is that in our biflationary nightmare, wages are stagnant or declining...  so, to those who would suggest debt as a hedge against inflation, I strongly urge otherwise if you have the least bit of worry about your timing...  you might get inflation all right...  but not any corresponding increase in wage to pay the loan.  (aside from the fact that this inflation will likely apply significant downward pressure on home prices).  Not good.

Thu, 01/19/2012 - 22:39 | 2080155 StychoKiller
StychoKiller's picture

Whew!  For a second there, I thought you got a boob job for 3.8% (Well, you are Captain Kink after all!) :>D

Thu, 01/19/2012 - 15:00 | 2078730 blunderdog
blunderdog's picture

I'd be more enthusiastic about such an interpretation except I keep wondering what number of people could *possibly* qualify for a mortgage at this point.  It seems to me that the only folks whose finances are in shape to get a loan already have houses.

Thu, 01/19/2012 - 15:12 | 2078790 Captain Kink
Captain Kink's picture

I held off buying during the housing boom and rented/saved the whole time, knowing that the time would come. There are more people who have waited/are still waiting than you might think.  

Thu, 01/19/2012 - 15:55 | 2078969 blunderdog
blunderdog's picture

I'm just looking at the demographics.  Median household income last year was $50K.  Median housing price $165K.

If it's unreasonable to expect 10% of the households to buy a house in the next year (and I believe it is), the market still has a LONG way to fall (40%?).  The only other possibility is that rents have to climb dramatically.  But a landlord can't get more rent than the locals have to pay, so that doesn't look possible.

Sat, 01/21/2012 - 04:10 | 2083684 Mentaliusanything
Mentaliusanything's picture

Nuns with Double DEEs - HMMMMMM - Roll me in honey and throw me to the lesbians - Im in Heaven at the thought

(Its a fetish you se you see yah Irish Git)

Thu, 01/19/2012 - 14:22 | 2078580 mind_imminst
mind_imminst's picture

BINGO! Ding, Ding, Ding

The FED is going to engage in some form of QE that will make these assets golden. It is a secretive bailout of Credit Suisse.

Thu, 01/19/2012 - 15:03 | 2078756 nowhereman
nowhereman's picture

And precisely why they dared not do the deal with Goldman, but somehow, you just know the squid will prosper from this.

Thu, 01/19/2012 - 15:51 | 2078955 viahj
viahj's picture

correct, MBS purchases in a QE3 (as in previous attempts) is not about "home ownership" , "housing market" or "mortgage rates"  it is about balance sheets and political talking points.  shit, the new "G" fee to Fannie and Freddie (to "pay" for the payroll tax extension) raised mortgage rates ...so they are now going to buy MBS to lower rates back down?  APOR on a 30yr is 3.950%, how much lower do rates need to be to usher in the utopian economic recovery?  bullshit, it's about balance sheets and nothing else.

Thu, 01/19/2012 - 14:08 | 2078514 Cdad
Cdad's picture

And the complete and blatant and utter destruction of capital markets continues on unabated at the Federal Reserve Bank.

Would someone just please ask everyone to exit the Eccles building and then nail plywood across the front door?  Thank you.

Thu, 01/19/2012 - 14:12 | 2078527 SheepDog-One
SheepDog-One's picture

Nail plywood to the doors with them all still inside then insert firehoses pumping 500 gallons per minute straight D-Con.

Thu, 01/19/2012 - 15:02 | 2078745 catacl1sm
catacl1sm's picture

Or the gas they used at Waco.

Thu, 01/19/2012 - 14:57 | 2078709 Stax Edwards
Stax Edwards's picture


Thu, 01/19/2012 - 14:09 | 2078515 kralizec
kralizec's picture

Ben don't need no stinkin' auction!

Thu, 01/19/2012 - 14:10 | 2078519 SheepDog-One
SheepDog-One's picture

Yes it was done in secrecy, but dont worry, it was judged 'Quite a good deal for you sheeple'.

Sat, 01/21/2012 - 04:15 | 2083685 Mentaliusanything
Mentaliusanything's picture

Quite right you are - Sheep are sold to the Abattoir with the same thought process.

Its a money turnover thingy

Thu, 01/19/2012 - 14:11 | 2078522 centerline
centerline's picture

A private firm completes a deal that is in the best of the average American.  Yeah, okay.  We are going to have create a list of Fed funnies in the same tradition as "I am from the Government and I am here to help you", "the check is in the mail", and "really, I won't ___ __ ___ mouth" (had to censor the last one for any minors in the room... LOL).

Thu, 01/19/2012 - 17:08 | 2079240 Assetman
Assetman's picture

Let me fix this for you:

A private firm completes a deal that is in the best of the average American... with the owners of that private firm being the only bidders to the deal.

There.  That's better.

See? Ben and P-Duddy are going to make it all A-OK.


Thu, 01/19/2012 - 14:13 | 2078529 Kaiser Sousa
Kaiser Sousa's picture

15 billion n 10yr TIPS just sold at a nominal interest rate of -0.046%........

and look at the fucking Dow, then look at how the metals traded last night....then in London, then at the open n NY, and now????

yeah, right....fuck all bankers and these rigged fucking markets....

off to pick up some more Eagles bitchez................


Thu, 01/19/2012 - 14:15 | 2078548 SheepDog-One
SheepDog-One's picture

Everyone elbowing each other in the face to pile into negative yield bonds....get ready somethin big is coming. A Shitnami I think.

Thu, 01/19/2012 - 14:28 | 2078606 blunderdog
blunderdog's picture

Shitnami seems like it, but I'm sure lost as to what the objective could be.  Given the PIMCO connection, could it really be that the Fed is going to go balls-out buying negative yield paper?  Seems too absurd to believe.  For what possible benefit could such a strategy be pursued?

Thu, 01/19/2012 - 14:38 | 2078645 sabra1
sabra1's picture

the intent is to own all mortgages, and have the pleebs  be renters! if you rent, no job, on foodstamps, no medicare, see how quickly people become obedient! bow before my avatar, sheeple!!!

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