The Insurance Giant A.I.G. has reacquired $2 billion worth of Maiden Lane Bonds that were at first part of its investment portfolio having been financed by the Federal Reserve Bank of New York. Maiden Lane II as it is known was established to absorb A.I.G.s troubled assets during the period of the now infamous bailout that the taxpayers ended up paying for.
This purchase of the bonds comes after the insurance company actually wanted to secure the complete Maiden Lane II portfolio which has a value of $15.7 billion. The Fed however had other ideas as they felt that the general public would benefit more if the securities were auctioned off to third parties.
This was seen as a big concern for A.I.G. and they came up with a solution by buying the Maiden Lane II bonds from the specific third parties that bought them at the auction. Two of these third parties were investment banking bulge brackets Goldman Sachs and Credit Suisse who paid $7 billion and $6.2 billion for the bonds respectively before selling them off to clients which also included A.I.G.
That was how A.I.G. had been able to get a hold of $2 billion of these securities but upper management of A.I.G. would have much preferred to have gotten the entire $15.7 billion portfolio. A.I.G. obviously fully expects the bond price to go up and expects to make profits from the sale of these Maiden Lane II securities. Still, A.I.G. will have to share these profits with the New York Fed.