The Federal Reserve Bank of New York
today marked the end of its financial involvement with American International Group
(AIG) which began in 2008 when the government stepped into save the company
from financial collapse. The Fed
announced that it has sold the remaining securities in the Maiden Lane III LLC
portfolio which was one of three limited liability companies created at height
of the financial crisis.
Maiden Lane I was formed to facilitate
the merger of JP Morgan Chase & Co. and Bear Stearns Companies, Inc. by
purchasing approximately $30 billion in assets from the mortgage desk at Bear
Stearns. Maiden Lane II and III were
formed specifically to alleviate capital and liquidity pressure on AIG stemming
from its securities lending program. ML
II involved the purchase by the Fed of $20.5 billion in residential
mortgage-backed securities (RMBS) from some of AIG's insurance subsidiaries and
through ML III the Fed purchased $29.3 billion in multi-sector collateralized debt
obligations from AIG Financial Products Corp. (AIGFP) counterparties. The Fed also extended credit to AIG at the
time of the crisis; that credit was terminated January 2011 producing
approximately $8.2 billion in interest and fees.
The sale today of the remaining
securities in the ML III portfolio will result in a net gain for taxpayers of
$6.6 billion including $737 million in accrued interest on the Fed's loan to ML
III. ML II which was wound down in
February 2012 resulted in a net gain of about $2.8 billion. Taken together, the total net profit to
taxpayers from the Federal Reserve's assistance to AIG and its subsidiaries and
facilities was $17.7 billion.
William
C. Dudley, president of the New York Fed, said, "The completion of the sale of
the Maiden Lane III portfolio marks the end of an important chapter-our
assistance to AIG-that was undertaken to stabilize the financial system in the
midst of the financial crisis. I am pleased that we were able to achieve our
principal goal, which was to protect the U.S. economy from the potentially devastating
effects of AIG's failure, while demonstrating sound stewardship of taxpayer
interests. I am proud of and commend all of the people at the New York Fed who
worked tirelessly and diligently to get us here."