Fed Gives Peek At Maiden Lane Portfolios

One of the entities formed to help American International Group Inc. unwind complicated financial transactions did better this summer than the other entity did, according to the Federal Reserve System.

The entities are Maiden Lane II and Maiden Lane III, two Delaware companies that are controlled by the Federal Reserve Bank of New York.

The Fed has published a report on the status of the entities here.

Maiden Lane II

In November 2008, the Federal Reserve Board authorized the New York Fed to lend up to $22.5 billion to Maiden Lane II to help it buy residential mortgage-backed securities from the securities lending portfolio of several regulated U.S. insurance subsidiaries of AIG (NYSE:AIG), Fed officials write in a monthly report on Fed credit and liquidity programs.

The New York Fed used the Maiden Lane II authority to lend that entity $19.5 billion in December 2008, officials write.

The fair value of the Maiden Lane II portfolio fell to $15.3 billion on June 30, down from $16.7 billion on March 31, officials report.

The value of Alt-A adjustable rate mortgage holdings held steady at about $4.4 billion, but the value of subprime mortgage assets fell to about $8.3 billion, from $9.7 billion, officials report.

About 72% of the assets in the portfolio now have ratings of BB plus or lower, officials report.

But AIG has reduced the amount of principal it owes the government to $17.7 billion, from $19.5 billion, officials report.

Maiden Lane III

The Fed authorized the New York Fed to lend up to $30 billion to Maiden Lane III to help it buy asset-backed collateralized debt obligations from some counterparties of AIG's failing AIG Financial Products Corp. units.

The New York Fed used that authority to lend Maiden Lane III $24.4 billion Nov. 25, 2008, officials write. Maiden Lane III assets are supposed to be "managed to maximize cash flows to ensure repayment of obligations of the LLC while minimizing disruptions to financial markets," officials write.

The fair value of the Maiden Lane III portfolio increased to $22.5 billion on June 30, from $20.7 billion on March 31.

The value of the high-grade asset backed securities CDOs in the portfolio increased to $15 billion, from about $13.6 billion, and the value of commercial real estate CDOs in the portfolio increased to $4.2 billion, from $3.8 billion.

AIG has reduced the amount of principal it owes the New York Fed in connection with Maiden Lane III to $22.6 billion, from $24.3 billion, officials write.

AIG Revolving Credit Facility

In addition to helping to back the Maiden Lane entities, the government has equipped AIG with a revolving credit facility.

The balance on that facility was about $39 billion on Sept. 30, down from $46 billion on April 29.