The Federal Reserve Bank of New York changed its investment objective for Maiden Lane III, a portfolio of mortgage-linked bonds acquired through its bailout of insurer American International Group (AIG), allowing it to explore the sale of some of the securities.
The New York Fed’s Web site now lists the investment objective as to “repay the New York Fed’s senior loan (including principal and interest),” which funded the takeover of the assets, “followed by AIG’s equity interest (including accumulated preferred distributions representing interest) for as long as the United States Treasury maintains an economic stake in AIG on behalf of the United States taxpayer.”
Previously, the New York Fed’s investment objective was to maximize long-term cash flow of the portfolio in order to repay the loan.
"The change in the investment objective for Maiden Lane III reflects a strategic decision to explore possible sales of some of the assets in the portfolio in light of improving market conditions and the success of the Maiden Lane II sales," the NY Fed said. "The Fed will only transact if it deems that a particular transaction represents good value, is done competitively and is not market disruptive."
A spokeswoman said the update was made late Tuesday.