A report released by the Federal Reserve Board showstaxpayers made $9.5 billion through its investment in twofacilities used to help provide liquidity to American InternationalGroup to prevent its collapse in 2008.

The two facilities are Maiden Lane II, and Maiden Lane III. Thereport contained information on the facilities as of July 31.

The securities in the two facilities were sold last August,but AIG is now seeking to collect more funds by suing BankAmerica,the successor to Countrywide, which was the original issuer to mostof the securities.

The suit is now pending in federal district court in LosAngeles.

Maiden Lane II originally received $19.5 billion from the saleof $39.3 billion in mortgage-backed securities to Maiden Lane II.The AIG insurance subsidiaries agreed to defer receipt of $1billion of the purchase price, and were paid interest on the $1billion until it was repaid by the Fed.

According to the Fed report, it ultimately gained $2.847 billionfrom sale of those securities.

Maiden Lane III originally contained $62 billion face value ofcollateralized debt obligations backed by mortgage-backedsecurities of various grades. AIG received $24.3 billion in cashfrom the sale of those securities to the facility. The Fed made$6.636 billion from the sale of the securities held in thatfacility.

The Fed ordered AIG to make the owners of the securities wholein the fall of 2008 because AIG’s Financial Products Group had soldcredit default swaps (CDS) to guarantee the securities.

But, the owners were paid $24.3 billion through the Fed and AIGput up another $5 billion in cash through a loan to thefacility.

The owners of the security repaid in full because AIG hadprovided them more than $30 billion in cash through margin callsthat required AIG to put more money on the table as its creditratings and the market value of the securities both sunk prior tothe Fed takeover, according to Fed officials.

The securities were multi-sector collateralized debtobligations. The CDS were issued by AIG’s Financial Products Group.The repurchases allowed AIGFP to terminate the associated CDS.

The issue is important because Maurice “Hank” Greenberg, formerAIG chairman and CEO, is suing the U.S. in Federal Court of Claimsin Washington through Starr International primarily based onallegations that the Fed treated AIG differently than otherdeeply-troubled financial companies during the 2008-2010 crisisperiod.

The suit has been cleared by the judge hearing the case fortrial, probably in August 2014. Starr International owned 13percent of AIG, and Greenberg was given control of it through asettlement with AIG in 2011.

It is unclear how much AIG ultimately gained from sale of thesecurities into the facilities.

Even five years or more after the securities were sold, mostlyonly garnered 30 to 56 cents on the dollar as late as 2012. Thesold for that high a price, mostly through auctions because at thatprice they offered a relatively high yield, and offered thepotential for capital gains as the housing market strengthened andthe underlying homes securing the mortgages rose in value.

The suit against BankAmerica seeks $7 billion in losses AIGalleged it suffered from sale of the securities in addition to thefunds it received from liquidation of the facilities by theFed.

Maiden Lane II was created to add liquidity to AIG’s 13 lifeinsurance subsidiaries. AIG had collateralized purchase of morethan $70 billion of mortgage-backed securities of various gradeswith high-grade securities held by AIG’s life insurancesubsidiaries as reserves.

The loans were all repaid and most of the securities in the twofacilities sold by mid-2012. The Treasury Department reimbursed itsinvestments in AIG and acquired the 79.9 percent of its stock in2011. It sold its entire investment in AIG by the fall of 2012.

The AIGFP unit’s issuance of CDS that at one point totaled $2.77trillion of obligations was what forced AIG to accept a takeover bythe Fed in September 2008.

The Fed originally provided AIG with $85 billion in cash to meetits obligations in return for 79.9 percent of its stock.

AIG was in trouble because it had used a very high credit ratingbased on its insurance and allied businesses to build its CDSbusiness.

A report by the Pennsylvania Insurance Department in October2010 indicated that in order to get a high credit rating, AIG hadcross-collateralized the reserves and businesses of all itsinsurance subsidiaries, property and casualty and life, in order tosecure the high credit rating used by AIGFP to sell CDS.

According to a Government Accountability Office report in 2011,at one point in 2009 the Fed was considering acquiring all of AIG’slife insurance subsidiaries in order to protect the companies, and,primarily, policyholders.