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Board of Governors of the Federal Reserve System
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Board of Governors of the Federal Reserve System

Monthly Report on Credit and Liquidity Programs
and the Balance Sheet

December 2009 (1.16 MB PDF)

Lending in Support of Specific Institutions

Quarterly Developments

  • Net income, including changes in valuation, for the Maiden Lane, Maiden Lane II, and Maiden Lane III LLCs was $329 million, $1,758 million, and $3,730 million, respectively, for the quarter ended September 30, 2009. As presented in table 24, these changes resulted in improvements to the fair value asset coverage of loans of the Federal Reserve Bank of New York (FRBNY) to the Maiden Lane LLCs.
  • Cash flows generated from the Maiden Lane II and Maiden Lane III portfolios are used to pay down the loans from the FRBNY. As shown in tables 29 and 32, those repayments totaled about $3.8 billion in the third quarter of 2009.

Background

In the current financial crisis, the Federal Reserve has extended credit to certain specific institutions in order to avert disorderly failures that could result in severe dislocations and strains for the financial system as a whole and harm the U.S. economy. In certain other cases, the Federal Reserve has committed to extend credit, if necessary, to support important financial firms.

Table 24. Fair Value Asset Coverage
Millions of dollars

  Fair value asset coverage of FRBNY loan on 9/30/2009 Fair value asset coverage of FRBNY loan 6/30/2009
Maiden Lane LLC (3,055) (3,400)
Maiden Lane II LLC (604) (2,371)
Maiden Lane III LLC 3,645 (129)
Note: Unaudited. Fair value asset coverage is the amount by which the fair value of the net portfolio assets of each LLC (refer to table 38) is greater or less than the outstanding balance of the loans extended by the FRBNY, including accrued interest.

Bear Stearns and Maiden Lane LLC

In March 2008, the FRBNY and JPMorgan Chase & Co. (JPMC) entered into an arrangement related to financing provided by the FRBNY to facilitate the merger of JPMC and the Bear Stearns Companies Inc. In connection with the transaction, the Federal Reserve Board authorized the FRBNY, under Section 13(3) of the Federal Reserve Act, to extend credit to a Delaware limited liability company, Maiden Lane LLC, to fund the purchase of a portfolio of mortgage-related securities, residential and commercial mortgage loans, and associated hedges from Bear Stearns. The LLC will manage its assets through time to maximize the repayment of credit extended to the LLC and to minimize disruption to the financial markets. In the second quarter of 2008, the FRBNY extended credit to Maiden Lane LLC. Details of the terms of the loan are published on the FRBNY website (www.newyorkfed.org/markets/maidenlane.html). The assets of Maiden Lane LLC are presented weekly in tables 1, 10, and 11 of the H.4.1 statistical release. Additional details on the accounts of Maiden Lane LLC are presented in table 4 of the H.4.1 statistical release.

Information about the assets and liabilities of Maiden Lane LLC is presented as of September 30, 2009, in tables 25 through 27 and figure 2. This information is updated on a quarterly basis.

Table 25. Maiden Lane LLC Outstanding Principal Balance of Loans
Millions of dollars

  FRBNY senior loan JPMC subordinate loan
Principal balance at closing 28,820 1,150
Most Recent Quarterly Activity
Principal balance on 6/30/2009 (including accrued and capitalized interest) 29,159 1,217
Accrued and capitalized interest 6/30/2009 to 9/30/2009 37 16
Repayment during the period from 6/30/2009 to 9/30/2009 0 0
Principal balance on 9/30/2009 (including accrued and capitalized interest) 29,196 1,233
Note: Unaudited. As part of the asset purchase agreement, JPMC made a loan to Maiden Lane LLC. For repayment purposes, this obligation is subordinated to the senior loan extended by the FRBNY.

Table 26. Maiden Lane LLC Summary of Portfolio Composition, Cash/Cash Equivalents, and Other Assets and Liabilities
Millions of dollars

  Fair value on 9/30/2009 Fair value on 6/30/2009
Agency MBS 17,437 16,424
Non-agency RMBS 1,938 1,962
Commercial loans 4,025 4,447
Residential loans 623 683
Swap contracts 1,318 1,827
TBA commitments1 382 1,199
Other investments 863 736
Cash & cash equivalents 1,446 1,805
Other assets2 527 827
Other liabilities3 (2,418) (4,151)
Net assets 26,141 25,759
Note: Unaudited. Components may not sum to totals because of rounding.
1. To be announced (TBA) commitments are commitments to purchase or sell mortgage-backed securities for a fixed price at a future date. Return to table
2. Including interest and principal receivable and other receivables. Return to table
3. Including amounts payable for securities purchased, collateral posted to Maiden Lane LLC by swap counterparties, and other liabilities/accrued expenses Return to table

Table 27. Maiden Lane LLC Securities Distribution by Type and Rating
Percent, as of September 30, 2009

Sector1 Rating
AAA AA+ to AA- A+ to A- BBB+ to BBB- BB+ and lower Gov't/
Agency 		Total
Agency MBS 0.0 0.0 0.0 0.0 0.0 86.2 86.2
Non-agency RMBS 0.5 0.6 0.8 0.4 7.3 0.0 9.6
Other2 1.5 0.9 0.3 0.9 0.7 0.0 4.3
Total 2.0 1.5 1.1 1.3 8.0 86.2 100.0
Note: Unaudited. This table presents the sector and ratings composition of the securities in the Maiden Lane LLC portfolio as a percentage of all securities in the portfolio. This table is based on the fair value of the securities. Lowest of all ratings is used for purposes of this table. Rows and columns may not sum to totals because of rounding.
1. Does not include Maiden Lane LLC's swaps and other derivative contracts, commercial and residential mortgage loans, and TBA investments. Return to table
2. Includes all asset sectors that, individually, represent less than 5 percent of the aggregate fair value of securities in the portfolio. Return to table

Figure 2. Maiden Lane LLC Securities Distribution as of September 30, 2009

Figure 2. Maiden Lane LLC Securities Distribution as of September 30, 2009. Two pie charts. Pie chart "Portfolio Rating Distribution" is a graphical representation of data from the Total row of Table 27. Pie chart "Portfolio Sector Distribution" is a graphical representation of data from the Total column of Table 27.

American International Group (AIG)

Recent Developments

  • As shown in table 28, the balance on the AIG revolving credit facility increased from $44.8 billion to $45.1 billion between October 28, 2009, and November 25, 2009, as loan drawdowns slightly outpaced loan repayments.
  • On December 1, 2009, the FRBNY received preferred interests in two special purpose vehicles (SPVs) established by AIG, completing transactions announced in March 2009. The SPVs were created to hold all the equity of the company's largest foreign insurance subsidiaries, American International Assurance Company Ltd. (AIA) and American Life Insurance Company (ALICO). In exchange for the preferred interests, the balance and amount of credit available to AIG under the FRBNY's revolving credit facility was reduced by $25 billion. These transactions advance AIG's global divestiture plan by preparing AIA and ALICO for initial public offerings or sale, and reduce the company's financial leverage.
  • AIG's management is examining the timing and execution of its asset divestitures and the wind-down of its various operating subsidiaries with a focus on maximizing long-term value and sequencing divestitures to retain operating businesses that can generate profits.

Table 28. AIG Revolving Credit Facility
Billions of dollars

Borrower Borrowing
Balance on October 28, 2009 44.8
   Principal drawdowns 1.1
   Principal repayments (1.0)
   Recapitalized interest and fees 0.0
   Amortization of restructuring allowance 0.1
Balance on November 25, 2009 45.1
Note: Unaudited. Components may not sum to total because of rounding. Does not include Maiden Lane II LLC and Maiden Lane III LLC.

Background

On September 16, 2008, the Federal Reserve, with the full support of the Treasury Department, announced that it would lend to AIG to prevent a disorderly failure of this systemically important firm, protect the financial system and the broader economy, and provide the company time to restructure its operations in an orderly manner. Initially, the FRBNY extended an $85 billion line of credit to the company. The terms of the credit facility are disclosed on the Board's website (www.federalreserve.gov/monetarypolicy/bst_supportspecific.htm). Loans outstanding under this facility are presented weekly in table 1 of the H.4.1 statistical release and included in "Other loans" in tables 10 and 11 of the H.4.1 statistical release.

On November 10, 2008, the Federal Reserve and the Treasury announced a restructuring of the government's financial support to AIG. As part of this restructuring, two new limited liability companies (LLCs) were created, Maiden Lane II LLC and Maiden Lane III LLC, and the line of credit extended to AIG was reduced from $85 billion to $60 billion. (On October 8, 2008, the FRBNY was authorized to extend credit to certain AIG subsidiaries against a range of securities. This arrangement was discontinued after the establishment of the Maiden Lane II facility.) More detail on these LLCs is reported in the remainder of this section. Additional information is included in tables 5 and 6 of the H.4.1 statistical release.

On March 2, 2009, the Federal Reserve and the Treasury announced an additional restructuring of the government's assistance to AIG, designed to enhance the company's capital and liquidity in order to facilitate the orderly completion of the company's global divestiture program. Additional information on the restructuring is available at www.federalreserve.gov/newsevents/press/other/20090302a.htm.

On April 17, 2009, the FRBNY implemented a loan restructuring adjustment that was previously approved and announced on March 2. The interest rate on the loan to AIG, which is the three-month Libor, plus 300 basis points, was modified by removing the existing interest rate floor of 3.5 percent on the Libor. Consistent with U.S. generally accepted accounting principles (GAAP), as of July 29, 2009, the reported value of the AIG revolving credit extension was reduced by a $1.3 billion adjustment to reflect the loan restructuring. This restructuring adjustment is intended to recognize the economic effect of the reduced interest rate and will be recovered as the adjustment is amortized over the remaining term of the credit extension. The Federal Reserve expects that the credit extension, including interest and commitment fees under the modified terms, will be fully repaid.

On June 25, 2009, the FRBNY entered into agreements with AIG to carry out two transactions previously approved and announced on March 2, as part of the restructuring of the U.S. government's assistance to AIG. These transactions were completed on December 1, 2009. Under these agreements, the FRBNY received preferred equity interests in two SPVs formed to hold the outstanding common stock of American International Assurance Company Ltd. (AIA) and American Life Insurance Company (ALICO), AIG's largest foreign insurance subsidiaries. In exchange, upon the closing of each transaction and the resulting issuance of preferred equity, the FRBNY reduced the outstanding balance and amount available to AIG under the revolving credit facility by $25 billion; the amount available under the revolving credit facility was reduced to $35 billion. By establishing the AIA and ALICO special purpose vehicles as separate legal entities, these transactions position both AIA and ALICO for future initial public offerings, depending on market conditions. Subject to certain conditions, proceeds from any public offerings by the companies must first be used to redeem the FRBNY's preferred interests, until the preferred interests have been redeemed in full.

The interest rate on the loan to AIG is the three-month Libor, plus 300 basis points. The lending under this facility is secured by a pledge of assets of AIG and its primary nonregulated subsidiaries, including all or a substantial portion of AIG's ownership interest in its regulated U.S. and foreign subsidiaries. Furthermore, AIG's obligations to the FRBNY are guaranteed by certain domestic, nonregulated subsidiaries of AIG with more than $50 million in assets.

Figure 3 shows the amount of credit extended to AIG over time through the credit facility, including the principal, interest, and commitment fees, along with the facility ceiling.

Figure 3. AIG Revolving Credit

Figure 3. AIG Revolving Credit

Note: The above data illustrate selected components of the amount of credit extended to the American International Group Inc., including loan principal, all capitalized interest and fees, and the amortized portion of the initial commitment fee. The data exclude commercial paper sold by AIG and its subsidiaries to the Commercial Paper Funding Facility as well as amounts borrowed prior to December 12, 2008, under a securities borrowing arrangement. The facility ceiling represents the limit on the credit agreement plus capitalized interest and fees; the ceiling was $60 billion until December 1, 2009, at which point it was reduced to $35 billion.
Accessible version

Maiden Lane II LLC

Under Section 13(3) of the Federal Reserve Act, the Federal Reserve Board authorized the FRBNY to lend up to $22.5 billion to a newly formed Delaware limited liability company, Maiden Lane II LLC, to fund the purchase of residential mortgage-backed securities (RMBS) from the securities lending portfolio of several regulated U.S. insurance subsidiaries of AIG. On December 12, 2008, the FRBNY loaned about $19.5 billion to Maiden Lane II LLC. Details of the terms of the loan are published on the FRBNY website (www.newyorkfed.org/markets/maidenlane2.html).

The net portfolio holdings of Maiden Lane II LLC are presented in tables 1, 10, and 11 of the weekly H.4.1 statistical release. Additional detail on the accounts of Maiden Lane II LLC is presented in table 5 of the H.4.1 statistical release.

Information about the assets and liabilities of Maiden Lane II LLC is presented as of September 30, 2009, in tables 29 through 31 and figure 4. This information is updated on a quarterly basis.

Table 29. Maiden Lane II LLC Outstanding Principal Balance of Senior Loan and Fixed Deferred Purchase Price
Millions of dollars

  FRBNY senior loan AIG fixed deferred purchase price
Principal balance at closing 19,494 1,000
Most Recent Quarterly Activity
Principal balance on 6/30/2009 (including accrued and capitalized interest) 17,712 1,020
Accrued and capitalized interest 6/30/2009 to 9/30/2009 55 8
Repayment during the period from 6/30/2009 to 9/30/2009 (966) 0
Principal balance on 9/30/2009 (including accrued and capitalized interest) 16,801 1,028
Note: Unaudited. As part of the asset purchase agreement, AIG subsidiaries were entitled to receive from Maiden Lane II a fixed deferred purchase price plus interest on the amount. This obligation is subordinated to the senior loan extended by the FRBNY, and it reduced the amount paid by Maiden Lane II for the assets by a corresponding amount.

Table 30. Maiden Lane II LLC Summary of RMBS Portfolio Composition, Cash/Cash Equivalents, and Other Assets and Liabilities
Millions of dollars

  Fair value on 9/30/2009 Fair value on 6/30/2009
Alt-A (ARM) 4,903 4,455
Subprime 8,758 8,348
Option ARM 939 840
Other1 1,299 1,371
Cash & cash equivalents 297 327
Other assets2 3 3
Other liabilites3 (2) (2)
Total 16,197 15,341
Note: Unaudited. Components may not sum to totals because of rounding.
1. Includes all asset sectors that, individually, represent less than 5 percent of aggregate outstanding fair value of securities in the portfolio. Return to table
2. Including interest and principal receivable and other receivables. Return to table
3. Including accrued expenses and other payables. Return to table

Table 31. Maiden Lane II LLC Securities Distribution by Sector and Rating
Percent, as of September 30, 2009

RMBS sector Rating
AAA AA+ to AA- A+ to A- BBB+ to BBB- BB+ and lower Total
Alt-A (ARM) 0.9 3.0 2.6 1.4 23.0 30.8
Subprime 8.1 3.0 2.9 2.6 38.5 55.1
Option ARM 0.0 0.0 0.0 0.0 5.9 5.9
Other1 0.1 0.6 0.0 0.0 7.4 8.2
Total 9.1 6.6 5.5 4.0 74.7 100.00
Note: Unaudited. This table presents the sector and ratings composition of Maiden Lane II LLC’s RMBS portfolio as a percentage of aggregate fair value of the securities in the portfolio. Lowest of all ratings is used for the purposes of this table. Rows and columns may not sum to totals because of rounding.
1. Includes all asset sectors that, individually, represent less than 5 percent of the aggregate fair value of securities in the portfolio. Return to table

Figure 4. Maiden Lane II LLC Securities Distribution as of September 30, 2009

Figure 4. Maiden Lane II LLC Securities Distribution as of September 30, 2009. Two pie charts. Pie chart 'Portfolio Rating Distribution' is a graphical representation of data from the Total row of Table 31. Pie chart 'Portfolio Sector Distribution' is a graphical representation of data from the Total column of Table 31.

Maiden Lane III LLC

Under Section 13(3) of the Federal Reserve Act, the Federal Reserve Board authorized the FRBNY to lend up to $30 billion to a newly formed Delaware limited liability company, Maiden Lane III LLC, to fund the purchase of certain asset-backed collateralized debt obligations (ABS CDOs) from certain counterparties of AIG Financial Products Corp. (AIGFP) on which AIGFP had written credit default swaps and similar contracts. On November 25, 2008, the FRBNY loaned about $24.4 billion to Maiden Lane III LLC. Details of the terms of the loan are published on the FRBNY website (www.newyorkfed.org/markets/maidenlane3.html). Assets of the portfolio of the LLC will be managed to maximize cash flows to ensure repayment of obligations of the LLC while minimizing disruptions to financial markets.

The net portfolio holdings of Maiden Lane III LLC are presented in tables 1, 10, and 11 of the weekly H.4.1 statistical release. Additional detail on the accounts of Maiden Lane III LLC is presented in table 6 of the H.4.1 statistical release.

Information about the assets and liabilities of Maiden Lane III LLC is presented as of September 30, 2009, in tables 32 through 34 and figure 5. This information is updated on a quarterly basis.

Table 32. Maiden Lane III LLC Outstanding Principal Balance of Senior Loan and Equity Contribution
Millions of dollars

  FRBNY senior loan AIG equity contribution
Principal balance at closing 24,339 5,000
Most Recent Quarterly Activity
Principal balance on 6/30/2009 (including accrued and capitalized interest) 22,614 5,108
Accrued and capitalized interest to 6/30/2009 to 9/30/2009 66 43
Repayment during the period from 6/30/2009 to 9/30/2009 (2,825) 0
Principal balance on 9/30/2009 (including accrued and capitalized interest) 19,855 5,151
Note: Unaudited. As part of the asset purchase agreement, AIG purchased a $5 billion equity contribution, which is subordinated to the senior loan extended by FRBNY.

Table 33. Maiden Lane III LLC Summary of Portfolio Composition and Cash/Cash Equivalents, and Other Assets and Liabilities
Millions of dollars

  Fair value on 9/30/2009 Fair value on 6/30/2009
High-Grade ABS CDO 16,001 14,491
Mezzanine ABS CDO 2,099 1, 882
Commercial real estate CDO 4,572 4,186
RMBS, CMBS, & Other 246 225
Cash & cash equivalents 547 1,645
Other assets1, 38 59
Other liabilites2 (3) (4)
Net assets 23,500 22,485
Note: Unaudited. Components may not sum to totals because of rounding.
1. Including interest and principal receivable and other receivables. Return to table
2. Including accrued expenses. Return to table

Table 34. Maiden Lane III LLC Securities Distribution by Sector,Vintage, and Rating
Percent, as of September 30, 2009

Security and vintage1 Rating
AAA AA+ to AA- A+ to A- BBB+ to BBB- BB+ and lower Not Rated Total
High-grade ABS CDO 0.0 0.0 0.0 0.7 69.1 0.0 69.8
   Pre-2005 0.0 0.0 0.0 0.7 23.9 0.0 24.6
   2005 0.0 0.0 0.0 0.0 30.1 0.0 30.1
   2006 0.0 0.0 0.0 0.0 7.5 0.0 7.5
   2007 0.0 0.0 0.0 0.0 7.6 0.0 7.6
Mezzanine ABS CDO 0.0 0.2 0.0 1.4 7.3 0.3 9.2
   Pre-2005 0.0 0.2 0.0 1.0 4.0 0.3 5.5
   2005 0.0 0.0 0.0 0.0 2.9 0.0 2.9
   2006 0.0 0.0 0.0 0.0 0.0 0.0 0.0
   2007 0.0 0.0 0.0 0.4 0.3 0.0 0.7
Commercial real-estate CDO 1.9 0.5 17.6 0.0 0.0 0.0 20.0
   Pre-2005 1.9 0.5 2.8 0.0 0.0 0.0 5.2
   2005 0.0 0.0 0.0 0.0 0.0 0.0 0.0
   2006 0.0 0.0 0.0 0.0 0.0 0.0 0.0
   2007 0.0 0.0 14.8 0.0 0.0 0.0 14.8
RMBS, CMBS, and other 0.2 0.2 0.1 0.1 0.5 0.0 1.1
   Pre-2005 0.0 0.0 0.0 0.1 0.1 0.0 0.2
   2005 0.2 0.1 0.1 0.1 0.4 0.0 0.8
   2006 0.0 0.0 0.0 0.0 0.1 0.0 0.1
   2007 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total 2.1 0.8 17.7 2.2 76.9 0.3 100.0
Note: Unaudited. This table presents the security, vintage, and rating composition of the securities in the Maiden Lane III LLC portfolio as a percentage of all securities in the portfolio. It is based on the fair value of the securities. Lowest of all ratings is used for purposes of this table. Rows and columns may not sum to totals because of rounding.
1. The year of issuance with the highest concentration of underlying assets as measured by outstanding principal balance determines the vintage of the CDO. Return to table

Figure 5. Maiden Lane III LLC Securities Distribution as of September 30, 2009

Figure 5. Maiden Lane III LLC Securities Distribution as of September 30, 2009. Two pie charts. Pie chart "Portfolio Rating Distribution" is a graphical representation of data from the Total row of Table 34. Pie chart "Portfolio Sector Distribution" is a graphical representation of data from the Total column of Table 34, for High-Grade ABS CDO, Mezzanine ABS CDO, and Commercial Real-Estate CDO.

Citigroup

On November 23, 2008, the Treasury, the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC) jointly announced that the U.S. government would provide support to Citigroup in an effort to support financial markets. The terms of the arrangement are provided on the Federal Reserve Board's website (www.federalreserve.gov/monetarypolicy/bst_supportspecific.htm). The FRBNY has not extended credit to Citigroup under this arrangement.

Bank of America

On January 16, 2009, the Treasury, the Federal Reserve, and the FDIC jointly announced that the U.S. government had agreed to provide certain support to Bank of America to promote financial market stability. Information concerning these actions is available on the Federal Reserve Board's website at www.federalreserve.gov/monetarypolicy/bst_supportspecific.htm.

On May 7, 2009, following the release of the results of the Supervisory Capital Assessment Program, Bank of America announced that it did not plan to move forward with a part of the package of supports announced in January 2009--specifically, a residual financing arrangement with the Federal Reserve and the related guarantee protections that would be provided by the Treasury and the FDIC with respect to an identified pool of approximately $118 billion in assets.

In September 2009, Bank of America paid an exit fee in order to terminate the term sheet, which was never implemented, with the Treasury, the Federal Reserve, and the FDIC. The Federal Reserve's portion of the exit fee was $57 million.

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Last update: August 2, 2013