The New York Fed received $3.2bn from its Maiden Lane II vehicle of mortgage-backed securities in January, the same month it sold some of the SPV’s assets to Credit Suisse, the FT says. The bank bought securities with a face value of $7bn. Goldman Sachs bought a further $6.2bn from the portfolio in an auction held this week, according to Bloomberg. Maiden Lane II transferred proceeds to the Fed in partial repayment of the $19.5bn loan used to purchase the securities from AIG in 2008, as part of the insurer’s bailout, reports the WSJ.
The Federal Reserve Bank of New York has suspended plans to sell off the remaining mortgage bonds held by its Maiden Lane II vehicle, conceding that investors’ retreat from riskier assets had weighed on the auction. The FT says the decision highlights how the uncertain outlook for the US housing market and abundant supply of assets for sale had combined in recent months to damp demand for the securities the regulator chose to auction off over time. It sold only 36 of the 73 securities that it had intended to auction off on June 9. By contrast, a May 10 sale secured buyers for 74 of the 79 securities that were auctioned.
Don’t get us wrong — what you see below doesn’t mollify our concerns about the Federal Reserve’s explanation for why commodity price rises will moderate.
But, courtesy of the NY Fed’s new blog, these graphs do shed some light on how the doves on the FOMC think about inflation expectations: Read more
The New York Federal Reserve has dealt a blow to AIG ahead of a public offering in May by saying it would auction mortgage-backed securities held in the Maiden Lane II vehicle rather than allow the insurance group to buy them back, the FT says. The NY Fed said it would sell the securities ‘individually and in segments’ rather than as one block, in order to maximise proceeds for taxpayers and ensure institutions did not have concentrated exposure to the securities. Robert Benmosche, AIG’s chief executive, said the decision was ‘not good’. AIG has a large cash pile for buying distressed assets, but few holders have been willing to sell at current prices.
The New York Federal Reserve has dealt a blow to AIG ahead of a public offering in May by saying it would auction a portfolio of mortgage-backed securities rather than sell them back to the insurance group, reports the FT. The New York Fed bought the Maiden Lane II securities as part of the 2008 AIG bail-out. AIG, 92% owned by the US Treasury, is sitting on a cash pile, which it wanted to use to buy back the securities. But the New York Fed said on Wednesday it would offer the securities “for sale individually and in segments rather than as a single block”. It said this would “maximise sale proceeds while also reducing the likelihood that any one institution ends up with concentrated exposure to these assets”.
So that’s that. Looks like $15.7bn just doesn’t go as far as it used to. Emphasis ours:
The Federal Reserve today announced that it has declined American International Group’s (AIG) offer to purchase all of the assets in Maiden Lane II LLC (MLII). Read more
For the commute home, or while wondering if expedia also does tax holidays,
– Do not gloss over munis’ frailties. Read more
Barclays is among a group of investors weighing a rival bid for a portfolio of mortgage-backed securities that has already drawn a $15.7bn offer from AIG, reports the FT citing people familiar with the matter. The securities are owned by the Federal Reserve Bank of New York and housed within Maiden Lane II, a special-purpose vehicle set up as part of the insurer’s $180bn financial crisis bail-out. AIG, which wants to buy back the assets to reduce its government obligations while finding a higher-yielding use for its cash, went public with its bid earlier this month after the New York Fed did not respond to a preliminary offer made in December. The stalemate comes as the US Treasury moves to sell as much as $20bn stock, in a push to cut the government’s 92% stake in the company.
So the New York Fed is now blogging, and its first post happens to be about one of our favourite topics, consumer deleveraging.
More specifically, the authors scrutinise the Consumer Credit Panel report in an effort to discern how much of the deleveraging since the crisis is the result of households actually paying down debt rather than defaulting on various types of loans. More than we thought, to be honest. Read more
Goldman Sachs has moved to address criticisms it put the bank’s interests ahead of clients, in a 39-step “self-improvement” plan that adds layers of oversight while leaving its top management intact, reports the FT. The report, presented by Goldman’s business-standards committee to the bank’s 400-plus partners on Monday after an eight-month review, introduces governance committees, overhauls the bank’s financial reporting structure and shifts activities between business lines. The committee also proposed that Goldman CEO Lloyd Blankfein and president, Gary Cohn, lead the changes. Lex says the report makes Goldman look even more like a “self-righting toy”, while in a separate analysis, the FT says the lack of change at the top may surprise some investors.
The Federal Reserve Bank of New York will on Wednesday explain to Treasury traders and investors how it will implement the vast bond purchases planned under the central bank’s new round of quantitative easing, known as “QE2”, reports the FT. On top of the $600bn of Treasuries to be purchased under “QE2” by mid-2011, the Fed will also buy an estimated $300bn of additional Treasuries – from reinvesting the proceeds of expiring mortgages, which is expected to push total purchases to about $900bn. The impact of such a large buyer in the Treasury market means that dealers and investors face the likelihood of selling bonds back to the New York Fed’s open market desk on an almost daily basis.
The Federal Reserve Bank of New York will on Wednesday tell Treasury traders and investors how it will implement the vast bond purchases dictated under the central bank’s new round of quantitative easing, or “QE2”, reports the FT. Aside from the $600bn of Treasuries slated for purchase under “QE2” until the end of next June, the Fed will also buy an estimated $300bn of additional Treasuries – from reinvesting the proceeds of expiring mortgages. That is expected to push total purchases to about $900bn. The impact of such a large buyer in the Treasury market means that dealers and investors face the likelihood of selling bonds back to the New York Fed’s open market desk on an almost daily basis.
How we’ve waited. The Federal Reserve Open Market Committee’s has unveiled $600bn — $900bn counting MBS re-investments — of Treasury purchases to combat weak inflation.
Here’s the key bit from the FOMC statement: Read more
Readers might remember a WSJ story earlier this year which highlighted intriguing end-of-quarter peculiarities in New York Fed data on primary dealers in repo markets.
The WSJ’s point was that the irregularities could have been the result of banks trying to mask their risk levels in the past five quarters by temporarily lowering their debt, just before reporting it to the public. Read more
After poring over documents and asking banks about their exposure to BP over the past two weeks, the Federal Reserve Bank of New York has decided there is no need to ask firms to alter their credit relationships with the oil major, Reuters reports. The NY Fed also concluded further troubles at the company, including a potential bankruptcy, would not pose a systemic risk to the US financial system. The Fed examination underscores market uncertainty about how the spill’s staggering clean-up bill might affect Wall Street.
Ben Bernanke’s prepared testimony for his appearance before the House Financial Services Committee on Wednesday makes a case for the continued independence of the Federal Reserve, at least as far as bank regulation is concerned.
The Fed chairman is out to fend off a $50bn threshold for the Fed’s supervisory ambit, as proposed by the redrafted regulation bill from the office of Senator Chris Dodd. Read more
The New York Federal Reserve is being investigated by Neil Barofsky, the special inspector general overseeing the Tarp bail-out scheme, over its disclosure of documents relating to the rescue of AIG and its counterparties. In a statement to the House oversight committee, Barofsky said his team is examining whether the New York Fed improperly withheld information about the AIG bail-out from the SEC and his office.
Internal documents provided to Congress shed further light on how the New York Fed approached its unsuccessful negotiations with US and European banks for concessions in the bailout of stricken insurer AIG, reports the WSJ. An analysis by asset manager BlackRock, given to the New York Fed in late 2008, highlights the bargaining power that various banks had with AIG on the issue of cancelling insurance contracts tied to souring mortgage securities.
The House oversight committee has submitted a legal demand for any phone records and emails from Tim Geithner that discuss payments from the New York Federal Reserve to AIG’s counterparties. Republicans on the committee are attempting to link the Treasury secretary to the bail-out of AIG’s counterparties – headed by Société Générale and Goldman Sachs – made during Geithner’s presidency of the NY Fed. The Treasury has said Geithner recused himself from the case ahead of becoming Treasury secretary, and the NY Fed has said he was not involved in a decision not to disclose details about the AIG payments.