Fed Increases Quarterly Value of AIG, Bear Stearns Holdings
The Federal Reserve raised by 3 percent its combined estimated value of investment portfolios acquired in the rescues of American International Group Inc. and Bear Stearns Cos.
The net holdings of three corporations set up by the Fed for the mortgages and securities it took on in bailing out AIG and Bear Stearns in 2008 rose by $2 billion to $69.1 billion, the Fed said today in a quarterly revaluation of the assets. The Bear Stearns investments increased to $29.4 billion, while the two AIG portfolios rose to $39.7 billion.
The increase in the value of the assets may support assurances by the central bank that taxpayers won’t lose money on loans it made in 2008 to create the corporations, which have an outstanding principal balance of $58.3 billion. The entities’ assets include mortgage-backed securities and portions of commercial loans for hotels.
The three special-purpose companies were named Maiden Lane, Maiden Lane II and Maiden Lane III after a street bordering the New York Fed building in Manhattan. The first Maiden Lane, formed for Bear Stearns assets, began repaying its Fed loan this month, the central bank said last week.
The Fed’s balance sheet declined by $7.04 billion during the past week to $2.33 trillion as of yesterday as its holdings of mortgage-backed securities decreased by $7.1 billion, according to today’s weekly balance-sheet release. Assets reached a record $2.35 trillion on May 19.
Currency swaps with other central banks were unchanged at $1.25 billion. The Fed restarted the swap lines in May in response to Europe’s sovereign-debt crisis.
Money Supply
M2 money supply rose by $11.9 billion in the week ended July 19, the Fed said. That left M2 growing at an annual rate of 1.7 percent for the past 52 weeks, below the target of 5 percent the Fed once set for maximum growth. The Fed no longer has a formal target.
The Fed reports two measures of the money supply each week. M1 includes all currency held by consumers and companies for spending, money held in checking accounts and travelers checks. M2, the more widely followed, adds savings and private holdings in money market mutual funds.
For the latest reporting week, M1 rose by $1.1 billion, and over the past 52 weeks M1 increased 5.2 percent, according to the central bank. The Fed no longer publishes figures for M3.
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net.
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