The Federal Reserve Bank of New York sold $7.01 billion in face value of mortgage bonds it assumed in the rescue of American International Group Inc. to Credit Suisse Group AG, the regional Fed bank said today.
The New York Fed sold the bonds through a “competitive process” after Goldman Sachs Group Inc. made an unsolicited offer to buy a portion of the assets in a vehicle called Maiden Lane II LLC, which held the bonds, according to a statement posted on the New York Fed’s website.
“I am pleased with the strength of the bids and the level of market interest in these assets,” New York Fed President William C. Dudley said in the statement.
The New York Fed in June ended a plan to sell a group of the assets assumed in AIG’s 2008 rescue through a series of auctions, following sales of about $10 billion in face value of mortgage securities. The Maiden Lane II assets had dwindled to about $21 billion when the auctions were halted after investors and traders blamed the sales for causing prices to tumble.
The broker-dealers who were part of the bidding process for the sale to Credit Suisse included Goldman Sachs, Barclays Capital and Bank of America Corp., according to the New York Fed. They were “selected based on their previous expressions of interest for large parcels of the portfolio and/or their participation” in the auctions held last year, the district bank said.
“The New York Fed decided to move forward with the transaction only after determining that the winning bid represented good value for the public,” the New York Fed said. “This transaction substantially reduces the ML II portfolio and loan at a desirable price,” the Fed district bank said, referring to Maiden Lane II.
The New York Fed began selling the bonds piecemeal after rejecting a $15.7 billion bid from AIG for the entire pool in March. The portfolio includes securities backed by the types of home loans with some of the highest default rates, such as so-called subprime, Alt-A and option adjustable-rate mortgage debt.
Steven Vames, a Credit Suisse spokesman, declined to comment on the transaction.