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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

June 2009 (927 KB PDF)

Lending in Support of Specific Institutions

Recent Developments

  • Recent quarterly revaluations resulted in a reduction to the fair value asset coverage of FRBNY loans to Maiden Lane LLC, Maiden Lane II LLC, and Maiden Lane III LLC, as presented in Table 24.

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
(in millions)

  Fair value asset coverage of FRBNY loan on 3/31/2009 Fair value asset coverage of FRBNY loan 12/31/2008
Maiden Lane LLC (3,771) (3,403)
Maiden Lane II LLC (1,965) (329)
Maiden Lane III LLC (3,441) 2,824
Note: Unaudited. Fair value asset coverage is the amount by which the fair value of the net portfolio assets of each LLC (see Table 37) is greater or less than the outstanding balance of the loans extended by the FRBNY, including accrued interest.

Bear Stearns

In March 2008, the FRBNY and JPMorgan Chase & Co. (JPMC) entered into an arrangement related to the 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. In the second quarter of 2008, 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 in tables 1, 9, and 10 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 release.

Information about the assets and liabilities of Maiden Lane LLC is presented in Tables 25 and 26. These tables are as of March 31, 2009, and are updated on a quarterly basis.

Table 25. Outstanding Principal Balance of Loans
(in millions)

  Senior loan Subordinate loan
Principal balance at closing 28,820 1,150
Accrued and capitalized interest to 12/31/2008 267 38
Principal repayment from closing to 12/31/2008 - -
Principal balance on 12/31/2008 29,087 1,188
Accrued and capitalized interest to 3/31/2009 36 14
Repayment during the period - -
Principal balance on 3/31/2009 29,123 1,202
Note: Unaudited.

Table 26. Summary of Portfolio Composition, Cash/Cash Equivalents, and Other Assets and Liabilities
(in millions)

  Fair value on 3/31/2009 Fair value on 12/31/2008
Agency CMOs 14,369 13,565
Non-agency CMOs 1,552 1,836
Commercial loans 4,697 5,553
Residential loans 780 937
Swap contracts 2,280 2,454
TBA commitments4 1,448 2,089
Other investments 1,221 1,360
Cash & cash equivalents1 2,640 2,531
Adjustment for other assets2 1,869 310
Adjustment for other liabilities3 (5,505) (4,951)
Net assets 25,352 25,684
Note: Unaudited.
1. Including cash and cash equivalents on deposit in the Reserve Account. Return to table
2. Including interest and principal receivable and other receivables. Return to table
3. Including amounts payable for TBAs, collateral posted to Maiden Lane LLC by swap counterparties, and other liabilities/accrued expenses. Return to table
4. TBA commitments are commitments to purchase or sell mortgage-backed securities for a fixed price at a future date. Return to table

Financial Tables: Maiden Lane LLC

At March 31, 2009, the ratings breakdown of the $17.1 billion fair value of securities in the Maiden Lane LLC portfolio (as a percentage of aggregate fair value of all securities in the portfolio) was as presented in Table 27.

Table 27. Maiden Lane LLC Asset Distribution by Type and Rating

Security type1 Rating
AAA AA+ to AA- A+ to A- BBB+ to BBB- BB+ and lower Gov't/
Agency 		Total3
Agency CMOs 0.0 0.0 0.0 0.0 0.0 83.8 83.8
Non-agency CMOs 2.2 0.2 0.8 0.4 5.4 0.0 9.1
Other2 2.4 1.4 0.5 0.7 2.2 0.0 7.1
Total3 4.6 1.6 1.3 1.1 7.6 83.8 100.0
Note: Lowest of all ratings is used for purposes of this table; data are in percent.
1. This table does not include Maiden Lane LLC's swaps and other derivative contracts, commercial and residential mortgage loans, and to be announced (TBA) investments. Return to table
2. Includes all asset sectors that, individually, represent less than 5 percent of aggregate portfolio fair value. Return to table
3. Rows and columns may not total because of rounding. Return to table

 

Figure 2. Maiden Lane LLC Portfolio Distribution

Figure 2. Maiden Lane LLC Portfolio Distribution. 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

  • The interest rate modification of the AIG credit facility, announced as part of the March 2, 2009 restructuring, was finalized and became effective as of April 17, 2009. AIG will continue to be charged interest at the three-month LIBOR rate plus 300 basis points, but the 3.5 percent floor on the contractual LIBOR rate has been removed.
  • On April 21, 2009, AIG announced its intention to accelerate the separation of several businesses by transferring AIU Holdings, which will serve as the holding company for AIG's Commercial Insurance, Foreign General Insurance, and Private Client Group units, to a special purpose vehicle (SPV). This is the first step in a process announced on March 2, 2009 that will result in AIU Holdings having a separate board of directors and management team, and a distinct brand from AIG. Inc. The transfer prepares AIU Holdings for a potential sale of a minority interest stake.
  • On May 15, 2009, Fitch Ratings downgraded various AIG ratings, including the Issuer Default Rating (IDR) to 'BBB' from 'A' and the Issuer Financial Strength (IFS) rating on the company's insurance subsidiaries. Simultaneously, Fitch affirmed AIG's short-term IDR and commercial paper ratings at 'F1'.None of the other major credit rating agencies (Moody's, S&P, or AM Best) announced any credit rating actions concerning AIG during May.
  • On May 19, 2009, AIG announced that six new independent director nominees--Harvey Golub, Laurette T. Koellner, Christopher S. Lynch, Arthur C. Martinez, Robert S. (Steve) Miller, and Douglas M. Steenland--will stand for election at the AIG annual meeting of shareholders, scheduled to be held on June 30, 2009.
  • On May 21, 2009, AIG announced that its chairman and CEO, Edward Liddy, has informed the AIG board of directors of his intent to step down once the board has successfully concluded its search for his successor(s) in these roles.
  • On May 28, 2009, AIG announced that it had completed the sale of its real estate holdings in the Otemachi District in Tokyo to Nippon Life Insurance Company, which paid approximately $1.2 billion in cash for the entire office building and approximately one acre of land on which it is situated.
  • Changes in borrowings under the revolving credit facility during May were relatively modest. Under the terms of the contract, interest is accrued quarterly, so no interest was added to the facility balance during the period.

Background

On September 16, 2008, the Federal Reserve announced that it would lend to AIG to provide the company with the time and flexibility to execute a value-maximizing strategic plan. Initially, the FRBNY extended an $85 billion line of credit to the company. The terms of the credit facility were disclosed on the Board's website (www.federalreserve.gov/monetarypolicy/bst_supportspecific.htm). Loans outstanding under this facility are presented in table 1 of the H.4.1 statistical release and included in "Other loans" in table 9 of the 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. More detail on these two LLCs is reported below. Additional information is included in table 5 in the H.4.1 statistical release. (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.)

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.

Financial Tables: AIG Credit Facility

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 Federal Reserve Bank of New York are guaranteed by each of AIG's domestic, nonregulated subsidiaries that have more than $50 million in assets. These guarantees themselves are separately secured by assets pledged to the Federal Reserve Bank of New York by the relevant guarantor.

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

Table 28. AIG Revolving Credit Facility

Borrower Borrowing
($ billions)
Balance on April 29, 2009 46
Drawdowns 1
Repayments 3
Balance on May 27, 2009 44
Note: Unaudited.

 

Figure 3. AIG Revolving Credit

Figure 3. AIG Revolving Credit

Accessible version

Financial Tables: Maiden Lane II

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, 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 assets of Maiden Lane II LLC are presented in tables 1, 9, and 10 of the 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 release.

Information about the assets and liabilities of Maiden Lane II LLC are outlined in Tables 29 to 31. These tables are as of March 31, 2009 and are updated on a quarterly basis.

As of March 31, 2009, the sector/rating composition of ML II LLC's $16.4 billion RMBS portfolio, as a percentage of aggregate fair value, was as noted in Table 31 and Figure 4.

Table 29. Maiden Lane II LLC Outstanding Principal Balance of Senior Loan and Fixed Deferred Purchase Price
($ millions)

  Senior loan Fixed deferred purchase price
Principal balance at closing $19,494 $1,000
Accrued and capitalized interest to 12/31/2008 27 3
Principal repayment from closing to 12/31/2008 0 0
Principal balance on 12/31/2008 19,522 1,003
Accrued and capitalized interest to 3/31/2009 68 9
Repayment during the period (952) 0
Principal balance on 3/31/2009 $18,638 $1,012
Note: Unaudited. As part of the asset purchase agreement, the AIG subsidiaries were entitled to receive from ML II a fixed deferred purchase price, plus interest on the amount. This obligation is subordinated to the senior loan extended by the FRBNY, and reduced the amount paid by ML II for the assets by a corresponding amount.

Table 30. Maiden Lane II LLC Summary of Portfolio Composition and Cash/Cash Equivalents
($ millions)

Type of asset Fair value on 3/31/2009 Fair value on 12/31/2008
Alt-A (ARM) $4,401 $5,226
Subprime 9,744 10,796
Other1 2,226 2,817
Cash & cash equivalents2 297 351
Total $16,668 $19,190
Note: Unaudited.
1. Includes all asset sectors that, individually, represent less than 5 percent of aggregate outstanding fair value of the portfolio. Return to table
2. Including cash and cash equivalents on deposit in the Expense Reimbursement Sub-Account. Return to table

Table 31. Maiden Lane II LLC Asset Distribution by Sector and Rating
(3/31/2009)

RMBS sector Rating
AAA AA+ to AA- A+ to A- BBB+ to BBB- BB+ and lower Total2
Alt-A (ARM) 2.0 2.5 1.6 2.0 18.8 26.9
Subprime 10.4 4.2 4.7 5.2 35.0 59.5
Other1 0.2 1.0 0.6 0.9 10.8 13.6
Total2 12.6 7.7 6.9 8.1 64.6 100.0
Note: Lowest of all ratings is used for the purposes of this table; data are in percent.
1. Includes all asset sectors that, individually, represent less than 5 percent of aggregate outstanding fair value of the portfolio. Return to table
2. Rows and columns may not total because of rounding. Return to table

 

Figure 4. Maiden Lane II LLC Portfolio Distribution

Figure 4. Maiden Lane II LLC Portfolio Distribution. 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.

Financial Tables: 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. on which AIG Financial Products had written credit default swap 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).

The assets of the Maiden Lane III LLC are presented in tables 1, 9, and 10 of the 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 release.

Information about the assets and liabilities of Maiden Lane III LLC is outlined in Tables 32 to 34. These tables are as of March 31, 2009, and are updated on a quarterly basis.

As of March 31, 2009, the ABS CDO type/vintage/rating composition of Maiden Lane III LLC's $19.2 billion portfolio, as a percentage of aggregate fair value of all securities in the portfolio, was as noted in Table 34 and Figure 5.

Table 32. Maiden Lane III LLC Outstanding Principal Balance of Senior Loan and Equity Contribution
($ millions)

  Senior loan Equity contribution
Principal balance at closing 24,339 5,000
Accrued and capitalized interest to 12/31/2008 45 22
Principal repayment from closing to 12/31/2008 - -
Principal balance on 12/31/2008 24,384 5,022
Accrued and capitalized interest to 3/31/2009 87 43
Repayment during the period (304) -
Principal balance on 3/31/2009 24,168 5,065
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
($ millions)

Asset Type Fair value on 3/31/2009 Fair value on 12/31/2008
High-Grade ABS CDO 13,565 18,770
Mezzanine ABS CDO 1,832 3,104
Commercial real estate CDO 3,761 4,791
Cash & cash equivalents1 1,508 408
Total 20,665 27,073
Note: Unaudited.
1. Including cash and cash equivalents on deposit in the Expense Reimbursement Sub-Account and Investment Reserve Sub-Account Return to table

Table 34. Maiden Lane III LLC Asset Distribution by CDO Type/Vintage and Rating

CDO type/vintage Rating
AAA AA+ to AA- A+ to A- BBB+ to BBB- BB+ and lower Total1
High-grade ABS CDO 0.1 4.5 0.0 0.6 65.6 70.8
2003-2004 0.1 2.3 0.0 0.6 25.8 28.7
2005 0.0 2.2 0.0 0.0 25.3 27.6
2006 0.0 0.0 0.0 0.0 14.5 14.5
Mezzanine ABS CDO 0.0 0.0 0.6 2.8 6.1 9.6
2003-2004 0.0 0.0 0.2 0.9 2.3 3.4
2005 0.0 0.0 0.4 1.8 3.8 6.1
2006 0.0 0.0 0.0 0.0 0.0 0.0
Commercial real-estate CDO 16.1 0.5 3.0 0.0 0.0 19.6
2002-2005 3.2 0.5 0.0 0.0 0.0 3.7
2006 0.0 0.0 3.0 0.0 0.0 3.0
2007 13.0 0.0 0.0 0.0 0.0 13.0
Total1 16.3 5.0 3.6 3.3 71.7 100.0
Note: Lowest of all ratings is used for purposes of this table; data are in percent.
1. Rows and columns may not total due to rounding. Return to table

 

Figure 5. Maiden Lane III LLC Portfolio Distribution

Figure 5. Maiden Lane III LLC Portfolio Distribution. 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 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) Because the FRBNY has not extended credit to Citigroup under this arrangement, the commitment is not reflected in the H.4.1 statistical release.

Bank of America

On January 16, 2009, the Treasury, the Federal Reserve, and the FDIC jointly announced that the U.S. government would provide support to Bank of America to support financial market stability. The terms of the support are provided on the Federal Reserve Board's website (www.federalreserve.gov/monetarypolicy/bst_supportspecific.htm). The agreement has not yet been formally signed and is under review by the parties involved. Because the Federal Reserve has not extended credit to Bank of America under this arrangement, the commitment is not reflected in the H.4.1 statistical release.

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Last update: August 2, 2013