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Maiden Lane LLC is the first holding company bearing the name that was created when JPMorgan Chase took over Bear Stearns in early 2008. It holds an asset portfolio that JPMorgan found too risky to assume in whole, and consequently the Federal Reserve Bank of New York extended a $30 billion credit line to the limited liability company to facilitate the unwinding of these assets over time...
A November 6, 2008, update by the Federal Reserve showed that the fair value of the assets was at $26.8 billion, meaning a book loss of $2 billion for the Federal Reserve.
Maiden Lane II LLC is a limited liability company created when American International Group Inc. (AIG) was taken over by the U.S. government in September 2008. Since AIG's subsidiaries hold a great many residential mortgage-backed securities that are very risky, Maiden Lane II LLC was formed to purchase these RMBS. On December 12, 2008, the Federal Reserve Bank of New York began extending credit to Maiden Lane II LLC. On the Fed's Balance Sheet as of May 6, 2009, net portfolio holdings of Maiden Lane II LLC are 18,016 million dollars
Maiden Lane III LLC is a holding company created when American International Group Inc. (AIG) was taken over by the U.S. government in September 2008. Similar to Maiden Lane II LLC, Maiden Lane III LLC aims to purchase multi-sector collateralized debt obligations (CDOs) on which the Financial Products group of AIG had written credit default swap contracts. On November 25, 2008, the Federal Reserve Bank of New York began extending credit to Maiden Lane III LLC. As of May 6, 2009, The Federal Reserve's net portfolio holding of Maiden Lane III LLC is 26.4 billion dollars
Bloomberg has an interesting story up on the AIG derivative "payoff" mess I've repeatedly written about (just stick "aig & billions" into the search box and start reading. Make sure you have a lot of time):
Beginning late in the week of Nov. 3, the New York Fed, led by President Timothy Geithner, took over negotiations with the banks from AIG, together with the Treasury Department and Chairman Ben S. Bernanke’s Federal Reserve. Geithner’s team circulated a draft term sheet outlining how the New York Fed wanted to deal with the swaps -- insurance-like contracts that backed soured collateralized-debt obligations.
Part of a sentence in the document was crossed out. It contained a blank space that was intended to show the amount of the haircut the banks would take, according to people who saw the term sheet. After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar. The content of its deliberations has never been made public.
Where did the NY Fed get this authority? Remember, this wasn't the NY Fed's money - it was ours. Where was it appropriated by Congress? This was not part of TARP - AIG was separate.
All appropriation bills must originate in The House.
This one didn't originate at all. It was simply arrogated by The Federal Reserve and the NY Fed.
This deal was even worse than it first appeared. The Fed also took a bunch of assets (which, it appears, is flatly illegal) and set them forward in an "off balance sheet" thing called Maiden Lane. How are they doing?
According to a quarterly New York Fed report on its holdings, the $29.6 billion in securities held by Maiden Lane III had declined in value by about $7 billion as of June 30.
Remember, Bernanke has repeatedly told us that The Federal Reserve was highly unlikely to lose any money on any of their programs.
In reality it looks like the loss - so far - has been 25%.
If that's "unlikely" I'd like to know what "likely" is.
More to the point, this appears to be an unauthorized appropriation of funds in fact by The Federal Reserve and NY Fed in which not only United States asset losses but those of FOREIGN INTERESTS were effectively transferred to the US Taxpayer without Congressional review or approval.
Originally posted by RoofMonkey
So it literally is "the back door" for their shenanigans.
Originally posted by Jamesy_boy
thus the private companies, take the good bits, keep the profits.
the tax payers look after the 'bad' bits and guarantee the losses.
Its effectively an excuse to quietly transfer 'billions' of bad debts out of these companies onto the books of the tax payer.