Maiden Lane Transactions
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Maiden Lane Transactions refers to three limited liability companies created by the Federal Reserve Bank of New York in 2008 as a financial vehicle to facilitate transactions involving three entities: the former Bear Stearns company as the first entity, the former American International Group's lending division as the second, and the former American International Group's credit default swap division as the third. The name Maiden Lane was taken from a street which runs beside New York Federal Reserve in Manhattan.[1]
Contents
History
The Financial Products group of AIG collected premiums from counterparties by entering into credit default swap contracts on CDOs.
During the third quarter of 2007 and continuing through 2008, the market value of the CDOs underlying these swap contracts fell. As the value of the underlying CDOs fell, AIG had to honor credit default swap contracts and make collateral payments. During the nine months ending September 30, 2008, AIG posted in excess of $52 billion of collateral to counterparties.[2] Maiden Lane III purchases of CDOs provide a cap on collateral payments related to said swap contracts.
Maiden Lane LLC
Maiden Lane LLC is the first holding company bearing the name that was created when JPMorgan Chase took over Bear Stearns in early 2008. It holds an asset portfolio that JPMorgan found too risky to assume in whole, and consequently the Federal Reserve Bank of New York extended a $30 billion credit line to the limited liability company to facilitate the unwinding of these assets over time. Bloomberg, citing Bank of America analysts, reported on October 2, 2008, that the Federal Reserve might stand to lose $2 to $6 billion on the asset porfolio. An October 7, 2010 update to the Federal Reserve balance sheet, as of October 6, 2010, reported the fair market value of net portfolio holdings were valued at $28.478 billion.[3][4][5]
The Maiden Lane name has been used for a series of bailouts including Maiden Lane II LLC and Maiden Lane III LLC. Maiden Lane was organized as Delaware Limited Liability Company on April 29, 2008,[6] and registered to do business as a foreign limited liability company in the state of New York on June 26, 2008.[7] The registered agent of Maiden Lane LLC is the CT Corporation.
Maiden Lane II LLC
Maiden Lane II LLC is a limited liability company created when American International Group Inc. (AIG) was taken over by the U.S. government in September 2008. Since AIG's subsidiaries hold a great many residential mortgage-backed securities that are very risky, Maiden Lane II LLC was formed with a $19.5 billion loan to purchase these RMBS. On December 12, 2008, the Federal Reserve Bank of New York began extending credit to Maiden Lane II LLC. An October 7, 2010 update to the Federal Reserve balance sheet, as of October 6,2010, reported the fair market value of net portfolio holdings were valued at $15.847 billion.[3]
A news story dated March 16, 2009,[8] stated Maiden Lane II used billions in bailout money to purchase toxic assets, and that AIG used billions to pay other banks, including foreign banks--France's Societe Generale at $11.9 billion, Germany's Deutsche Bank at $11.8 billion, and Britain's Barclays PLC at $8.5 billion. AIG, through this fund also funneled significant bailout money to U.S. banks that had already been bailed out themselves under the Troubled Asset Relief Program. As AIG counterparties, Goldman Sachs got $12.9 billion, Bank of America got $5.2 billion, and Citigroup got $2.3 billion all at 100% on the dollar.
The March 16, 2009 article was critical of AIG's plan to pay in excess of $170 million as bonuses to AIG employees.
This was the second in a series of LLC companies formed to deal with the bank bailouts.
Maiden Lane III LLC
Maiden Lane III LLC is a holding company created when American International Group Inc. (AIG) was taken over by the U.S. government in September 2008. It was formed by a $24.3 billion loan from the Federal Reserve. Similar to Maiden Lane II, Maiden Lane III LLC aims to purchase multi-sector collateralized debt obligations (CDOs) on which the Financial Products group of AIG had written credit default swap contracts. On November 25, 2008, the Federal Reserve Bank of New York began extending credit to Maiden Lane III LLC. An October 7, 2010 update to the Federal Reserve balance sheet, as of October 6, 2010, reported the fair market value of net portfolio holdings were valued at $23.003 billion.[3]
References
- ^ By EAMON JAVERS (March 25, 2009). "What's in a Maiden Lane name? - Eamon Javers". Politico.Com. http://www.politico.com/news/stories/0309/20430.html. Retrieved September 11, 2010.
- ^ "Introduction" (PDF). http://www.sigtarp.gov/reports/audit/2009/Factors_Affecting_Efforts_to_Limit_Payments_to_AIG_Counterparties.pdf. Retrieved September 11, 2010.
- ^ a b c "Federal Reserve Statistical Release". Federal Reserve Bank of New York. August 10, 2010. http://www.federalreserve.gov/releases/h41/Current/.
- ^ "Fed Says Bear Stearns Portfolio Declines $2.7 Billion". Bloomberg. October 23, 2008. http://www.bloomberg.com/apps/news?pid=20601087&sid=aEZiY02M5pIA&refer=home. Retrieved October 23, 2008.
- ^ Torres, Craig (April 1, 2010). "Fed Reveals Bear Stearns Assets Swallowed to Get JPMorgan to Rescue Firm". Bloomberg. http://www.bloomberg.com/apps/news?pid=20601087&sid=aZA_RWY3IJ2I&pos=4. Retrieved September 11, 2010.
- ^ "Division of Corporations - Delaware". April 29, 2008. https://delecorp.delaware.gov/tin/controller. Retrieved April 29, 2008.
- ^ "Division of Corporations - New York". April 29, 2008. http://appsext8.dos.state.ny.us/corp_public/CORPSEARCH.ENTITY_INFORMATION?p_nameid=3686926&p_corpid=3689653&p_entity_name=maiden%20lane&p_name_type=A&p_search_type=BEGINS&p_srch_results_page=0. Retrieved April 29, 2008.
- ^ [1][dead link]
External links
- Federal Reserve Bank of New York - Maiden Lane Transactions
- FRB: H.4.1 Release-- Factors Affecting Reserve Balances -- July 3, 2008
- Federal Reserve Bank of New York's Summary of Maiden Lane Transactions
- "Federal Reserve Bank: H.4.1 Release -- Factor Affecting Reserve Balances"
- [2]
- "Federal Reserve Bank: H.4.1 Release -- Factor Affecting Reserve Balance".
- "SIGTARP Report 10-003 - Factors Affecting Efforts to Limit Payments"
Categories:- American International Group
- Companies established in 2008
- Late-2000s financial crisis
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