NY Fed Rejects AIG’s Attempt To Eat Its Own Vomit

Remember a few weeks ago, the “AIG is like a dog eating its own vomit” story, where AIG had made an offer to the Federal Reserve to buy back the Maiden Lane II assets that the Fed had taken off their hands during the crisis?    Many commentators noted that this was horseshit, and that the Fed should sell the portfolio to the highest bidder, which is now exactly what they’ve decided to do:

The Federal Reserve today announced that it has declined American International Group’s (AIG) offer to purchase all of the assets in Maiden Lane II LLC (MLII).

After careful review, the Federal Reserve Bank of New York (New York Fed) and the Board of Governors of the Federal Reserve System (Board) judged that the public interest in maximizing returns from any sale and promoting financial stability would be better served by an alternative approach to realizing value that is also more consistent with normal market practice.

and they’re gonna sell the portfolio piecemeal:

Offering the Maiden Lane securities for sale individually and in segments rather than as a single block will give a larger set of investors opportunity to bid for the assets. The Federal Reserve believes that this will maximize sale proceeds while also reducing the likelihood that any one institution ends up with concentrated exposure to these assets.

Sounds pretty reasonable to me.


disclosure: I own AIG warrants.

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