NU Online News Service, Feb. 9, 3:02 p.m.EST

The Federal Reserve Bank of New York today ended one chapterfrom the American International Group bailout, selling a group ofmortgage-backed securities that closed out its Maiden Lane IIfacility.

The FRBNY says it sold securities with a face value of $6.2billion from its Maiden Lane II portfolio through a competitiveprocess to Goldman Sachs & Co.

AIG declined to comment on the sale at this time.

The Fed says that the proceeds from this sale and a Jan. 19 saleto Credit Suisse will enable the repayment of the entire remainingoutstanding balance of the senior loan from the New York Fed to MLII on the next payment date in early March. The original amount ofthe senior loan was $19.5 billion.

The Fed created two facilities in November 2008 to provide $44billion in cash to AIG in late 2008 that paid off a part of a loanmade earlier. The facilities were called Maiden Lane II and MaidenLane III.

They constituted the second Fed effort to bail out AIG.

The Maiden Lane facilities were backed with approximately $79billion in MBS and collateralized debt obligations of variousquality purchased by AIG Financial Products and backed byhigh-quality bonds held by AIG in its life-insurance subsidiaries,whose assets were also guaranteed by its property and casualtyoperating subsidiaries.

The ML II facility involved residential mortgage-backedsecurities of various grades from prime to sub-prime.

The Maiden Lane III facility involved collateralized debtobligations from AIG   Financial ProductsCorp.

The Fed received a request in 2011 from AIG to buy back thefacilities, but the Fed decided in March 2011 that it could get abetter deal by selling them directly.

However, when the Fed responded to an unsolicited offer fromCredit Suisse Securities (USA) LLC in January to buy ML II assets,the market easily absorbed the paper.

Tom Fink, senior vice president and managing director of TreppLLC., which tracks these transactions, says, "Maiden Lane II is afacility that the NY Fed set up to hold collateral received fromAIG when it loaned AIG TARP money. 

"The bonds were primarily subprime residential mortgage bondsand [their sale] will have little impact on the CMBS market."

The five broker-dealers who made bids were Barclays CapitalInc., Credit Suisse Securities (USA) LLC, Goldman Sachs & Co.,Morgan Stanley & Co. LLC, and RBS Securities Inc., the Fedsays. The broker-dealers were selected based on the strength ofeach of their recently submitted reverse inquiries for largeparcels of the portfolio, the Fed explains.

William C. Dudley, President of the New York Fed, says, "I ampleased with the continued interest in these assets and amespecially gratified that the New York Fed's loan to ML II will berepaid as a result of the sale announced today."