Print
Monthly Report on Credit and Liquidity Programs
and the Balance Sheet
| Lending Facilities | Lending in Support of Specific Institutions | Financial Tables |
Lending in Support of Specific Institutions
Recent Developments
- As presented in Table 24, net income including changes in valuation for the quarter ended June 30, 2009, resulted in improvements to the fair value asset coverage of loans of the Federal Reserve Bank of New York (FRBNY) to Maiden Lane and Maiden Lane III LLCs, while a net loss further reduced the coverage of the loan to Maiden Lane II LLC.
- Cash flows generated from the Maiden Lane II and Maiden Lane III portfolios are used to pay down the loans from the FRBNY. As shown in Tables 29 and 32, those repayments totaled about $2.6 billion in the second quarter of 2009.
Background
In the current financial crisis, the Federal Reserve has extended credit to certain specific institutions in order to avert disorderly failures that could result in severe dislocations and strains for the financial system as a whole and harm the U.S. economy. In certain other cases, the Federal Reserve has committed to extend credit, if necessary, to support important financial firms.
Table 24. Fair Value Asset Coverage
($ millions)
| Fair value asset coverage of FRBNY loan on 6/30/2009 | Fair value asset coverage of FRBNY loan 3/31/2009 | |
|---|---|---|
| Maiden Lane LLC | (3,400) | (3,771) |
| Maiden Lane II LLC | (2,371) | (1,965) |
| Maiden Lane III LLC | (129) | (3,435) |
Bear Stearns and Maiden Lane LLC
In March 2008, the FRBNY and JPMorgan Chase & Co. (JPMC) entered into an arrangement related to financing provided by the FRBNY to facilitate the merger of JPMC and the Bear Stearns Companies Inc. In connection with the transaction, the Federal Reserve Board authorized the FRBNY, under section 13(3) of the Federal Reserve Act, to extend credit to a Delaware limited liability company, Maiden Lane LLC, to fund the purchase of a portfolio of mortgage-related securities, residential and commercial mortgage loans, and associated hedges from Bear Stearns. The LLC will manage its assets through time to maximize the repayment of credit extended to the LLC and to minimize disruption to the financial markets. In the second quarter of 2008, the FRBNY extended credit to Maiden Lane LLC. Details of the terms of the loan are published on the FRBNY website (www.newyorkfed.org/markets/maidenlane.html). The assets of Maiden Lane LLC are presented weekly in tables 1, 9, and 10 of the H.4.1 statistical release. Additional details on the accounts of Maiden Lane LLC are presented in table 4 of the H.4.1 statistical release.
Information about the assets and liabilities of Maiden Lane LLC is presented as of June 30, 2009, in Tables 25 through 27 and Figure 2. This information is updated on a quarterly basis.
Table 25. Maiden Lane LLC Outstanding Principal Balance of Loans
($ millions)
| FRBNY Senior loan | JPMC Subordinate loan | |
|---|---|---|
| Principal balance at closing | 28,820 | 1,150 |
| Most Recent Quarterly Activity | ||
| Principal balance on 3/31/2009 (including accrued and capitalized interest) | 29,123 | 1,202 |
| Accrued and capitalized interest 3/31/2009 to 6/30/2009 | 36 | 15 |
| Repayment during the period from 3/31/2009 to 6/30/2009 | - | - |
| Principal balance on 6/30/2009 (including accrued and capitalized interest) | 29,159 | 1,217 |
Table 26. Maiden Lane LLC Summary of Portfolio Composition, Cash/Cash Equivalents, and Other Assets and Liabilities
($ millions)
| Fair value on 6/30/2009 | Fair value on 3/31/2009 | |
|---|---|---|
| Agency CMOs | 16,424 | 14,369 |
| Non-agency CMOs | 1,962 | 1,552 |
| Commercial loans | 4,447 | 4,697 |
| Residential loans | 683 | 780 |
| Swap contracts | 1,827 | 2,280 |
| TBA commitments1 | 1,199 | 1,448 |
| Other investments | 736 | 1,221 |
| Cash & cash equivalents | 1,805 | 2,640 |
| Other assets2 | 827 | 1,869 |
| Other liabilities3 | (4,151) | (5,505) |
| Net assets | 25,759 | 25,352 |
1. To be announced (TBA) commitments are commitments to purchase or sell mortgage-backed securities for a fixed price at a future date. Return to table
2. Including interest and principal receivable and other receivables. Return to table
3. Including amounts payable for securities purchased, collateral posted to Maiden Lane LLC by swap counterparties, and other liabilities/accrued expenses Return to table
Table 27. Maiden Lane LLC Securities Distribution by Type and Rating (in percent)
As of June 30, 2009
| Security type1 | Rating | ||||||
|---|---|---|---|---|---|---|---|
| AAA | AA+ to AA- | A+ to A- | BBB+ to BBB- | BB+ and lower |
Gov't/ Agency |
Total | |
| Agency CMOs | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 85.9 | 85.9 |
| Non-agency CMOs | 0.8 | 0.7 | 0.9 | 0.7 | 7.2 | 0.0 | 10.3 |
| Other2 | 1.6 | 1.2 | 0.3 | 0.4 | 0.3 | 0.0 | 3.8 |
| Total | 2.4 | 1.9 | 1.2 | 1.1 | 7.5 | 85.9 | 100.0 |
1. This table does not include Maiden Lane LLC's swaps and other derivative contracts, commercial and residential mortgage loans, and to be announced (TBA) investments. Return to table
2. Includes all asset sectors that, individually, represent less than 5 percent of aggregate portfolio fair value. Return to table
Figure 2. Maiden Lane LLC Securities Distribution as of June 30, 2009
American International Group (AIG)
Recent Developments
- The balance on the AIG revolving credit facility declined by $3.1 billion between July 29, 2009, and August 26, 2009, as loan repayments outpaced loan drawdowns over the reporting period (Table 28). Recapitalized interest and fees and the amortization of the restructuring allowance contributed an insignificant amount to the facility balance. These amounts are amortized over the remaining term of the credit extension, and thus are expected to trend toward zero.
Table 28. AIG Revolving Credit Facility
| Borrower |
Borrowing ($ billions) |
|---|---|
| Balance on July 29, 2009 | 42.2 |
| Principal drawdowns | 0.8 |
| Principal repayments | -3.9 |
| Recapitalized interest and fees | * |
| Amortization of restructuring allowance | 0.1 |
| Balance on August 26, 2009 | 39.1 |
Asset Divestitures
- On August 11, 2009, AIG Financial Products completed the sale of its energy and infrastructure investment assets, realizing aggregate net proceeds in excess of $1.9 billion.
- On August 12, 2009, AIG announced that it had entered into an agreement to sell 100 percent of its shares of AIG Finance (Hong Kong) Limited ("AIG Finance") to China Construction Bank Asia for $70 million in cash, subject to typical closing adjustments, plus the repayment of intra-group indebtedness and deposits of approximately $557 million in U.S. dollars. The transaction is subject to the satisfaction of certain conditions, including approvals by appropriate regulatory authorities.
Management Updates
- On August 7, 2009, AIG announced that Robert G. Gifford had been named President and Chief Executive Officer of AIG Global Real Estate, the international real estate investment organization.
- On August 20, 2009, AIG announced that Jay S. Wintrob had been named President and Chief Executive Officer of Domestic Life and Retirement Services. Mr. Wintrob will lead AIG's U.S.-based life insurance and retirement services businesses, which market their products and services under the brands American General, American General Life and Accident Insurance Company (AGLA), SunAmerica, Variable Annuity Life Insurance Company (VALIC), and Western National. Mary Jane Fortin, currently Senior Executive Vice President, Chief Administrative Officer, and Chief Financial Officer of the domestic life companies, has been named President and Chief Executive Officer of American General Life Companies.
Background
On September 16, 2008, the Federal Reserve, with the full support of the Treasury Department, announced that it would lend to AIG to prevent a disorderly failure of this systemically important firm, protect the financial system and the broader economy, and provide the company time to restructure its operations in an orderly manner. Initially, the FRBNY extended an $85 billion line of credit to the company. The terms of the credit facility are disclosed on the Board's website (www.federalreserve.gov/monetarypolicy/bst_supportspecific.htm). Loans outstanding under this facility are presented weekly in table 1 of the H.4.1 statistical release and included in "Other loans" in tables 9 and 10 of the H.4.1 statistical release.
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 limited liability companies (LLCs) were created, Maiden Lane II LLC and Maiden Lane III LLC, and the line of credit extended to the company was reduced from $85 billion to $60 billion. (On October 8, 2008, the FRBNY was authorized to extend credit to certain AIG subsidiaries against a range of securities. This arrangement was discontinued after the establishment of the Maiden Lane II facility.) More detail on these LLCs is reported in the remainder of this section. Additional information is included in tables 5 and 6 of the H.4.1 statistical release.
On March 2, 2009, the Federal Reserve and the Treasury announced an additional restructuring of the government's assistance to AIG, designed to enhance the company's capital and liquidity in order to facilitate the orderly completion of the company's global divestiture program. Additional information on the restructuring is available at www.federalreserve.gov/newsevents/press/other/20090302a.htm.
On April 17, 2009, the FRBNY implemented a loan restructuring adjustment that was previously approved and announced on March 2. The interest rate on the loan to AIG, which is the three-month LIBOR plus 300 basis points, was modified by removing the existing interest rate floor of 3.5 percent on the LIBOR rate. Consistent with U.S. generally accepted accounting principles (GAAP), as of July 29, 2009, the reported value of the AIG revolving credit extension was reduced by a $1.3 billion adjustment to reflect the loan restructuring. This restructuring adjustment is intended to recognize the economic effect of the reduced interest rate and will be recovered as the adjustment is amortized over the remaining term of the credit extension. The Federal Reserve expects that the credit extension, including interest and commitment fees under the modified terms, will be fully repaid.
On June 25, 2009, the FRBNY entered into agreements with AIG to carry out two transactions previously approved and announced on March 2, as part of the restructuring of the U.S. government's assistance to AIG. Under these agreements, the FRBNY will receive preferred equity interests in two special-purpose vehicles formed to hold the outstanding common stock of American International Assurance Company Ltd. (AIA) and American Life Insurance Company (ALICO), two life insurance subsidiaries of AIG. In exchange, upon the closing of each transaction and the resulting issuance of preferred equity, the FRBNY will reduce the outstanding balance and amount available to AIG under the revolving credit facility. The closing of each transaction is expected to occur by the end of 2009, pending the completion of the necessary regulatory approval processes. These transactions, when consummated, will position both AIA and ALICO for future initial public offerings, depending on market conditions. Subject to certain conditions, proceeds from any public offerings by the companies must first be used to redeem the FRBNY's preferred interests, until the preferred interests have been redeemed in full.
The interest rate on the loan to AIG is the three-month LIBOR rate plus 300 basis points. The lending under this facility is secured by a pledge of assets of AIG and its primary nonregulated subsidiaries, including all or a substantial portion of AIG's ownership interest in its regulated U.S. and foreign subsidiaries. Furthermore, AIG's obligations to the FRBNY are guaranteed by certain domestic, nonregulated subsidiaries of AIG with more than $50 million in assets.
Figure 3 shows the amount of credit extended to AIG over time through the credit facility, including the principal, interest, and commitment fees, along with the facility ceiling.
Figure 3. AIG Revolving Credit
Accessible version
Maiden Lane II LLC
Under section 13(3) of the Federal Reserve Act, the Federal Reserve Board authorized the FRBNY to lend up to $22.5 billion to a newly formed Delaware limited liability company, Maiden Lane II LLC, to fund the purchase of residential mortgage-backed securities (RMBS) from the securities lending portfolio of several regulated U.S. insurance subsidiaries of AIG. On December 12, 2008, the FRBNY loaned about $19.5 billion to Maiden Lane II LLC. Details of the terms of the loan are published on the FRBNY website (www. newyorkfed.org/markets/maidenlane2.html).
The assets of Maiden Lane II LLC are presented in tables 1, 9, and 10 of the weekly H.4.1 statistical release. Additional detail on the accounts of Maiden Lane II LLC is presented in table 5 of the H.4.1 statistical release.
Information about the assets and liabilities of Maiden Lane II LLC is presented as of June 30, 2009, in Tables 29 through 31 and Figure 4. This information is updated on a quarterly basis.
Table 29. Maiden Lane II LLC Outstanding Principal Balance of Senior Loan and Fixed Deferred Purchase Price
($ millions)
| FRBNY Senior loan | AIG Fixed deferred purchase price | |
|---|---|---|
| Principal balance at closing | 19,494 | 1,000 |
| Most Recent Quarterly Activity | ||
| Principal balance on 3/31/2009 (including accrued and capitalized interest) | 18,638 | 1,012 |
| Accrued and capitalized interest 3/31/2009 to 6/30/2009 | 64 | 8 |
| Repayment during the period from 3/31/2009 to 6/30/2009 | (990) | 0 |
| Principal balance on 6/30/2009 (including accrued and capitalized interest) | 17,712 | 1,020 |
Table 30. Maiden Lane II LLC Summary of Portfolio Composition and Cash/Cash Equivalents
($ millions)
| Type of asset | Fair value on 6/30/2009 | Fair value on 03/31/2009 |
|---|---|---|
| Alt-A (ARM) | 4,455 | 4,401 |
| Subprime | 8,348 | 9,744 |
| Option ARM1 | 840 | 728 |
| Other1,2 | 1,371 | 1,497 |
| Cash & cash equivalents | 327 | 297 |
| Other assets3,4 | 3 | 7 |
| Other liabilites4,5 | (2) | (2) |
| Total | 15,341 | 16,673 |
1. Aggregate fair value of positions classified under "Option ARM" was included as part of “Other” in previous reports because it was less than 5 percent of the aggregate fair value of securities in the portfolio at that time. Return to table
2. Includes all asset sectors that, individually, represent less than 5 percent of aggregate outstanding fair value of securities in the portfolio. Return to table
3. Including interest and principal receivable and other receivables. Return to table
4. "Other assets" and "Other liabilities" were not presented in previous reports. Return to table
5. Including accrued expenses. Return to table
Table 31. Maiden Lane II LLC Asset Distribution by Sector and Rating (in percent)
As of June 30, 2009
| RMBS sector | Rating | |||||
|---|---|---|---|---|---|---|
| AAA | AA+ to AA- | A+ to A- | BBB+ to BBB- | BB+ and lower | Total | |
| Alt-A (ARM) | 1.4 | 3.1 | 1.8 | 2.3 | 21.0 | 29.7 |
| Subprime | 8.8 | 3.3 | 3.5 | 2.9 | 37.2 | 55.6 |
| Option ARM1 | 0.0 | 0.0 | 0.0 | 0.0 | 5.6 | 5.6 |
| Other1,2 | 0.2 | 1.0 | 0.0 | 0.0 | 7.9 | 9.1 |
| Total | 10.3 | 7.5 | 5.3 | 5.3 | 71.7 | 100.00 |
1. Aggregate fair value of positions classified under "Option ARM" was included as part of "Other" in previous reports because it was less than 5 percent of the aggregate fair value of securities in the portfolio at that time. Return to table
2. Includes all asset sectors that, individually, represent less than 5 percent of the aggregate fair value of securities in the portfolio. Return to table
Figure 4. Maiden Lane II LLC Portfolio Distribution as of June 30, 2009 
Maiden Lane III LLC
Under section 13(3) of the Federal Reserve Act, the Federal Reserve Board authorized the FRBNY to lend up to $30 billion to a newly formed Delaware limited liability company, Maiden Lane III LLC, to fund the purchase of certain asset-backed collateralized debt obligations (ABS CDOs) from certain counterparties of AIG Financial Products Corp. (AIGFP) on which AIGFP had written credit default swaps and similar contracts. On November 25, 2008, the FRBNY loaned about $24.4 billion to Maiden Lane III LLC. Details of the terms of the loan are published on the FRBNY website (www.newyorkfed.org/markets/maidenlane3.html). Assets of the portfolio of the LLC will be managed to maximize cash flows to ensure repayment of obligations of the LLC while minimizing disruptions to financial markets.
The assets of Maiden Lane III LLC are presented in tables 1, 9, and 10 of the weekly H.4.1 statistical release. Additional detail on the accounts of Maiden Lane III LLC is presented in table 6 of the H.4.1 statistical release.
Information about the assets and liabilities of Maiden Lane III LLC is presented as of June 30, 2009, in Tables 32 through 34 and Figure 5. This information is updated on a quarterly basis.
Table 32. Maiden Lane III LLC Outstanding Principal Balance of Senior Loan and Equity Contribution
($ millions)
| Senior loan | Equity contribution | |
|---|---|---|
| Principal balance at closing | 24,339 | 5,000 |
| Most Recent Quarterly Activity | ||
| Principal balance on 3/31/2009 (including accrued and capitalized interest) | 24,168 | 5,065 |
| Accrued and capitalized interest to 3/31/2009 to 6/30/2009 | 82 | 43 |
| Repayment during the period from 3/31/2009 to 6/30/2009 | (1,636) | - |
| Principal balance on 6/30/2009 (including accrued and capitalized interest) | 22,614 | 5,108 |
Table 33. Maiden Lane III LLC Summary of Portfolio Composition and Cash/Cash Equivalents
($ millions)
| Asset Type | Fair value on 6/30/2009 | Fair value on 3/31/2009 |
|---|---|---|
| High-Grade ABS collateralized debt obligations (CDO) | 14,491 | 13,565 |
| Mezzanine ABS CDO | 1,882 | 1,832 |
| Commercial real estate CDO | 4,186 | 3,761 |
| RMBS, CMBS, & Other | 225 | - |
| Cash & cash equivalents | 1,645 | 1,508 |
| Other assets1,2 | 59 | 73 |
| Other liabilites2,3 | (4) | (5) |
| Total | 22,485 | 20,733 |
1. Including interest and principal receivable and other receivables. Return to table
2. "Other assets" and "Other liabilities" were not presented in previous reports. Return to table
3. Including accrued expenses. Return to table
Table 34. Maiden Lane III LLC Asset Distribution by CDO Type/Vintage and Rating
| CDO type/vintage1 | Rating | ||||||
|---|---|---|---|---|---|---|---|
| AAA | AA+ to AA- | A+ to A- | BBB+ to BBB- | BB+ and lower | Not Rated | Total | |
| High-grade ABS CDO | 0.0 | 0.0 | 0.0 | 0.7 | 69.0 | 0.0 | 69.7 |
| Pre-2005 | 0.0 | 0.0 | 0.0 | 0.7 | 24.2 | 0.0 | 24.9 |
| 2005 | 0.0 | 0.0 | 0.0 | 0.0 | 29.6 | 0.0 | 29.6 |
| 2006 | 0.0 | 0.0 | 0.0 | 0.0 | 7.6 | 0.0 | 7.6 |
| 2007 | 0.0 | 0.0 | 0.0 | 0.0 | 7.6 | 0.0 | 7.6 |
| Mezzanine ABS CDO | 0.0 | 0.2 | 0.2 | 2.4 | 6.0 | 0.3 | 9.1 |
| Pre-2005 | 0.0 | 0.2 | 0.2 | 1.7 | 3.1 | 0.3 | 5.5 |
| 2005 | 0.0 | 0.0 | 0.0 | 0.0 | 2.8 | 0.0 | 2.8 |
| 2006 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| 2007 | 0.0 | 0.0 | 0.0 | 0.8 | 0.0 | 0.0 | 0.8 |
| Commercial real-estate CDO | 16.7 | 0.5 | 3.0 | 0.0 | 0.0 | 0.0 | 20.1 |
| Pre-2005 | 2.7 | 0.5 | 3.0 | 0.0 | 0.0 | 0.0 | 6.1 |
| 2005 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| 2006 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| 2007 | 14.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 14.0 |
| RMBS, CMBS, and other | 0.2 | 0.1 | 0.1 | 0.1 | 0.5 | 0.0 | 1.1 |
| Pre-2005 | 0.0 | 0.0 | 0.0 | 0.1 | 0.1 | 0.0 | 0.2 |
| 2005 | 0.2 | 0.1 | 0.1 | 0.1 | 0.4 | 0.0 | 0.8 |
| 2006 | 0.0 | 0.0 | 0.0 | 0.0 | 0.1 | 0.0 | 0.1 |
| 2007 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Total | 16.9 | 0.8 | 3.3 | 3.3 | 75.5 | 0.3 | 100.0 |
1. The year of issuance with the highest concentration of underlying assets as measured by outstanding principal balance determines the vintage of the CDO. Return to table
Figure 5. Maiden Lane III LLC Portfolio Distribution as of June 30, 2009
Citigroup
On November 23, 2008, the Treasury, the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC) jointly announced that the U.S. government would provide support to Citigroup in an effort to support financial markets. The terms of the arrangement are provided on the Federal Reserve Board's website (www.federalreserve.gov/monetarypolicy/bst_supportspecific.htm). Because the FRBNY has not extended credit to Citigroup under this arrangement, the commitment is not reflected in the H.4.1 statistical release.
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 are provided on the Federal Reserve Board's website (www.federalreserve.gov/monetarypolicy/bst_supportspecific.htm). 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 this planned support--specifically, a residual financing arrangement authorized for the company 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. Because the Federal Reserve has not extended credit to Bank of America under this arrangement, the commitment is not reflected in the H.4.1 statistical release.
