The Federal Reserve Bank of New York announced today the sale of the rest of the securities in the Maiden Lane III (ML III) portfolio.
Taxpayers will enjoy a net gain of roughly $6.6 billion from the bank's management of the ML III portfolio. This includes $737 million in accrued interest on the New York Fed’s loan to ML III.
The New York Fed formed ML III, along with ML II, in November 2008 to prevent the collapse of the American International Group (AIG). ML III funded the purchase of $29.3 billion in fair value CDOs on which AIG had written protection while ML II bought $20.5 billion in fair value of RMBS from AIG's securities lending portfolio.
The New York Fed also set up the ML I vehicle in early 2008 to facilitate the sale of Bear Stearns to JPMorgan Chase.
The wind-down of the ML III vehicles means the non-agency market will lose a consistent source of bonds it has had throughout 2012, said Bank of America Merrill Lynch analysts in a report released late July.
The net proceeds from past ML III sales, which were conducted by BlackRock Solutions, and the cash flow the securities generated while held in the portfolio have allowed the full repayment of the New York Fed’s loan, plus interest, on June 14 and AIG’s equity contribution to ML III, plus interest, on July 16, according to the New York Fed's release.
“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," said William Dudley, president of the New York Fed. "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.”
Today’s announcement on ML III follows the successful wind-down of ML II in February 2012, which translated into a net gain of roughly $2.8 billion for taxpayers.
It also comes after the January 2011 end of the New York Fed’s extension of credit to AIG, which produced about $8.2 billion in interest and fees.
When put altogether, the total net profit to taxpayers from the New York Fed’s assistance to AIG and AIG-related facilities was $17.7 billion.
Net proceeds from the final sale of ML III securities will be reported as part of the portfolio’s normal reporting schedule on Oct. 15.
The New York Fed will also provide further details regarding all ML III deals, including an account showing the acquirer and the price paid for each individual security, on Nov. 23.