Credit and Liquidity Programs and the Balance Sheet
- Recent balance sheet trends
- Open market operations
- Central bank liquidity swaps
- Lending to depository institutions
Support for specific institutions
During the financial crisis, the Federal Reserve provided support to certain specific institutions in order to avert disorderly failures that could have led to even more severe dislocations and strains for the financial system as a whole and harmed the U.S. economy. For the same reason, in certain other cases the Federal Reserve provided support arrangements for certain key firms. This page discusses such actions. Details on the associated risks, interest rates, and collateral for this lending are provided in the collateral and rate setting and risk management sections of this website.
To facilitate the acquisition of the Bear Stearns Companies, Inc. by JPMorgan Chase & Co., the Federal Reserve Bank of New York (FRBNY) created and extended credit to Maiden Lane LLC. Maiden Lane LLC is a limited liability company (LLC) formed to acquire certain assets of Bear Stearns and to manage those assets through time to maximize the repayment of credit extended to the LLC and to minimize disruption to financial markets. The terms of the loan to Maiden Lane LLC were disclosed on the FRBNY website.
- Transaction Data, December 1, 2010
- Factors Affecting Reserve Balances (H.4.1)
- Reports Pursuant to Section 129 of the Emergency Economic Stabilization Act of 2008
- Letter to U.S. Government Accountability Office regarding AIG, January 19, 2010 (PDF)
Federal Reserve Bank of New York
Because the FRBNY is the primary beneficiary of the LLC, the assets and liabilities of the LLC are consolidated onto the balance sheet of the FRBNY. As a result, the assets of the LLC are presented in tables 1, 5, and 6 of the H.4.1 statistical release. Extra detail on the accounts of Maiden Lane LLC is presented in table 4 of the H.4.1 statistical release. The first line in table 4 presents the "fair value" of the portfolio of assets held by the LLC. Fair value is an estimate of the price that would be received upon selling an asset if the transaction were to be conducted in an orderly market. The next two lines of table 4 present the principal and interest owed to the FRBNY by the LLC.
On June 14, 2012, the FRBNY announced that its loan to Maiden Lane LLC has been repaid in full, with interest. This repayment marks the retirement of the remaining debt owed to the FRBNY from the crisis-era intervention with Bear Stearns.
American International Group
On September 16, 2008, the Federal Reserve announced that it would lend to American International Group, Inc., (AIG) to provide AIG with the time and flexibility to execute a value-maximizing strategic plan. Initially, the FRBNY extended an $85 billion line of credit to the company. On October 8, 2008, the FRBNY was authorized to extend credit to certain AIG subsidiaries against a range of securities. The terms of these transactions are disclosed on the FRBNY website.
- Statement by the Federal Reserve Bank of New York Regarding AIG Transaction
- Press release, September 16, 2008
- Actions Related to AIG
On November 10, 2008, the Federal Reserve and the Treasury announced a restructuring of the government's financial support to AIG. As part of this restructuring, two new LLCs were created and the line of credit extended to AIG was reduced by $25 billion. On November 25, 2008, the FRBNY began extending credit to Maiden Lane III LLC, a company formed to purchase multi-sector collateralized debt obligations (CDOs) on which the Financial Products group of AIG had written credit default swap and similar contracts. On December 12, 2008, FRBNY began extending credit to Maiden Lane II LLC, a company formed to purchase residential mortgage-backed security (RMBS) assets from AIG subsidiaries. Details of the terms of these loans were published on the FRBNY website. Because these LLCs were consolidated onto the balance sheet of the FRBNY, the loans from the FRBNY to the LLCs were not on the balance sheet.
- AIG CDO LLC Facility: Terms and Conditions
- AIG RMBS LLC Facility: Terms and Conditions
- Maiden Lane transactions
On March 2, 2009, the Federal Reserve and the Treasury announced a restructuring of the government's assistance to AIG. Specifically, the government's restructuring was designed to enhance the company's capital and liquidity in order to facilitate the orderly completion of the company's global divestiture program. As part of this restructuring, on December 1, 2009, the Federal Reserve completed transactions under which the FRBNY received preferred interests in two special purpose vehicles formed to hold the outstanding common stock of AIG's largest foreign insurance subsidiaries, American International Assurance Company Ltd. (AIA) and American Life Insurance Company (ALICO). In exchange, the outstanding loan balance held by, and maximum amount available to, AIG under the line of credit were reduced by $25 billion. These transactions positioned AIA and ALICO for future IPO or sale.
On September 30, 2010, AIG announced an agreement with the Treasury, the FRBNY, and the trustees of the AIG Credit Facility Trust ("Trust") on a comprehensive recapitalization plan (the "Recapitalization") designed to facilitate repayment of all its obligations to American taxpayers. On December 8, 2010, AIG announced a definitive agreement with ALICO Holdings LLC, AIA Aurora LLC, the FRBNY, the Treasury, and the Trust regarding the Recapitalization. On January 14, 2011, AIG, the Treasury, and the FRBNY closed the Recapitalization plan. As a result, the revolving credit facility was fully repaid, and the FRBNY's commitment to lend any further funds was terminated. The FRBNY also received the full amount, including all accrued dividends, of its SPV preferred interests in AIA Aurora LLC and ALICO Holdings LLC.
The FRBNY's loans to Maiden Lane II LLC and Maiden Lane III LLC were repaid in full, with interest, on March 1, 2012, and June 14, 2012, respectively. These repayments marked the retirement of the remaining debt owed to the FRBNY from the crisis-era intervention with AIG. Maiden Lane II LLC and Maiden Lane III LLC were formally terminated in November 2014.
On November 23, 2008, the Treasury, the Federal Reserve, and the FDIC jointly announced that the U.S. government would provide support to Citigroup to contribute to financial market stability. In December 2009, the Treasury, the Federal Reserve, and the FDIC agreed to terminate the Master Agreement dated January 15, 2009, with Citigroup. In consideration for terminating the Master Agreement, the FRBNY received a $50 million termination fee from Citigroup.
- Joint Statement by Treasury, Federal Reserve, and the FDIC on Citigroup November 23, 2008
- Term sheet (42 KB PDF)
Bank of America
On January 16, 2009, the Treasury, the Federal Reserve, and the FDIC jointly announced that the U.S. government would provide support to Bank of America to support financial market stability. The terms of the support were disclosed on this website. On May 7, 2009, following the release of the results of the Supervisory Capital Assessment Program, Bank of America announced that it did not plan to move forward with a part of the package of supports announced in January 2009--specifically, a residual financing arrangement with the Federal Reserve and the related guarantee protections that would be provided by the Treasury and the FDIC with respect to an identified pool of approximately $118 billion in assets. In September 2009, Bank of America paid an exit fee in order to terminate the term sheet with the Treasury, the Federal Reserve, and the FDIC. The term sheet was never implemented. The Federal Reserve's portion of the exit fee was $57 million.
- Joint Statement by Treasury, Federal Reserve, and the FDIC on Bank of America, January 16, 2009
- Term sheet (77 KB PDF)