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Monthly Report on Credit and Liquidity Programs
and the Balance Sheet
| Lending Facilities | Lending in Support of Specific Institutions | Financial Tables |
Lending in Support of Specific Institutions
Recent Developments
- Financial information on the Maiden Lane facilities has not been updated since the last monthly report. Quarterly revaluations as of June 30, 2009, will be available in the coming weeks, and will be presented in the next monthly report along with other asset and liability updates.
- Quarterly revaluations as of March 31, 2009, 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.
- Loan repayments to the AIG credit facility outpaced drawdowns in the four weeks since the last monthly report.
- On June 25, 2009, AIG and FRBNY entered into agreements to carry out transactions involving American International Assurance Company Ltd.(AIA) and American Life Insurance Company (ALICO) that were authorized as part of the March 2, 2009, restructuring of the government’s assistance to AIG. These transactions, when consummated, will reduce the debt that AIG owes the FRBNY and position both AIA and ALICO for future initial public offerings, depending on market conditions.
Table 24. Fair Value Asset Coverage
(in millions)
| Fair value asset coverage of FRBNY loan on 3/31/2009r | 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 | (3,435) | 2,824 |
r Revised for technical adjustment. Return to table
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.
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. 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 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 statistical 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. Maiden Lane LLC 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 |
Table 26. Maiden Lane LLC 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 commitments1 | 1,448 | 2,089 |
| Other investments | 1,221 | 1,360 |
| Cash & cash equivalents2 | 2,640 | 2,531 |
| Adjustment for other assets3 | 1,869 | 310 |
| Adjustment for other liabilities4 | (5,505) | (4,951) |
| Net assets | 25,352 | 25,684 |
1. TBA commitments are commitments to purchase or sell mortgage-backed securities for a fixed price at a future date. Return to table
2. Including cash and cash equivalents on deposit in the Reserve Account. Return to table
3. Including interest and principal receivable and other receivables. Return to table
4. Including amounts payable for TBAs, collateral posted to Maiden Lane LLC by swap counterparties, and other liabilities/accrued expenses. Return to table
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 |
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
American International Group (AIG)
Recent Developments
- On June 10, 2009, AIG announced that it had closed a secondary public offering of 29.9 million shares of Transatlantic Holdings, Inc. (TRH) common stock owned by AIG and its indirect subsidiary, American Home Assurance Company (AHAC). Aggregate proceeds were $1.136 billion. AHAC now owns 9,192,662 common shares, representing approximately 13.9 percent of TRH's common shares issued and outstanding.
- On June 25, 2009, the FRBNY entered into agreements with AIG to carry out two transactions previously approved and announced on March 2, 2009, as part of the restructuring of the U.S. government's assistance to AIG. Under these agreements, the FRBNY will receive preferred equity interests in two special purpose vehicles (SPVs) to be formed to hold the outstanding common stock of American International Assurance Company Ltd. (AIA) and American Life Insurance Company (ALICO), two life insurance subsidiaries of AIG. In exchange, upon the closing of each transaction and the resulting issuance of preferred equity, the FRBNY will reduce the outstanding balance and amount available to AIG under the $60 billion Revolving Credit Facility by an aggregate amount of $25 billion, reflecting the value of the preferred interests to be received by the FRBNY in the AIA SPV ($16 billion) and the ALICO SPV ($9 billion). The closing of each transaction is expected to occur by the end of 2009, pending the completion of the necessary regulatory approval processes. The common equity of the SPVs will be held by AIG, which will continue to control the day-to-day management of the companies. The FRBNY has the ability to appoint two observers to SPV board meetings, and the FRBNY's consent is required for the SPVs, AIA, or ALICO to undertake a variety of significant actions. These transactions, when consummated, will reduce the debt that AIG owes the FRBNY and position both AIA and ALICO for future initial public offerings, depending on market conditions. Subject to certain conditions, proceeds from any public offerings of the companies must first be used to redeem the FRBNY's preferred interests, until the preferred interests have been redeemed in full.
- On June 30, 2009, shareholders of AIG elected six new directors at the company's annual meeting: Harvey Golub, Laurette T. Koellner, Christopher S. Lynch, Arthur C. Martinez, Robert S. Miller, and Douglas M. Steenland.
- As shown in Table 28, loan repayments by AIG outpaced drawdowns in the current reporting period. Under the terms of the contract, interest increases the principal outstanding at a quarterly frequency, so no interest was added to the facility balance in the period.
Table 28. AIG Revolving Credit Facility
| Borrower |
Borrowing ($ billions) |
|---|---|
| Balance on May 27, 2009 | 44 |
| Drawdowns | 1 |
| Repayments | 2 |
| Balance on June 24, 2009 | 43 |
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 H.4.1 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 in the remainder of this section. Additional information is included in tables 5 and 6 of 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.
The interest rate on the loan to AIG is the three-month LIBOR rate 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 displays 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
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 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 Maiden Lane II LLC's $16.4 billion RMBS portfolio, as a percentage of aggregate fair value, was as noted in Table 31 and Figure 4.
Figure 4. Maiden Lane II LLC Portfolio Distribution
Table 29. Maiden Lane II LLC Outstanding Principal Balance of Senior Loan and Fixed Deferred Purchase Price
($ 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 |
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 |
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 |
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
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 |
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 Collateralized Debt Obligations(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 |
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 |
1. Rows and columns may not total due to rounding. Return to table
Figure 5. Maiden Lane III LLC Portfolio Distribution
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). 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). 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 this planned support--specifically, a residual financing arrangement authorized for the company 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. 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.
