AIG Faces Competition For Securities Held By NY Fed

NU Online News Service, March 24, 2:48 p.m. EDT

Competition has broken out over ownership of American International Group securities held by the Federal Reserve Bank of New York—and AIG is demanding that a decision be made soon so it can get the matter behind it.

AIG had offered to buy mortgage-backed securities held by the Federal Reserve Bank of New York for $15.7 billion.

The high-yield instruments, backed by residential mortgages, were held before the fall of 2008 in AIG's life subsidiaries and sold to the FRBNY to increase liquidity when the company was struggling to stay in business.

In comments Wednesday on CNBC, Robert Benmosche, AIG president and CEO, confirmed that the NY Fed is likely conducting an auction, and said "time is of the essence."

According to CNBC, the NY Fed acknowledges that it's been "aware of AIG's interest in those assets for some time."

CNBC reported that a NY Fed decision on what to do with the assets will be based on maximizing taxpayer returns and financial stability.

Benmosche told CNBC a number of securities firms are looking at the securities, and he said AIG wants a quick answer because when it put together the deal and the financing that provided a government exit from AIG, it calculated that it could earn more from the securities held in Maiden Lane II than other investments on the market.