Maiden Lane LLC, the company created by the Federal Reserve Bank of New York in its rescue of Bear Stearns Cos. in 2008, is shrinking at a faster pace as it sells holdings.
The assets of Maiden Lane, used by the U.S. central bank to facilitate the sale of the New York-based investment bank to JPMorgan Chase & Co., were valued at $24.8 billion on April 27, down from $25.6 billion on March 30 and $30 billion at inception, according to weekly Fed data released yesterday. The 4.7 percent decline in the holdings, which are mostly government-backed mortgage bonds, is the largest since October 2008.
The New York Fed also this month began selling $31 billion of mortgage bonds without government backing acquired in the U.S. bailout of American International Group Inc. after refusing the insurer’s offer to buy back that debt for $15.7 billion. While more-detailed past disclosures indicate some of the Bear Stearns-related bonds were sold last year, the Fed may be ready to speed the pace, according to BNP Paribas SA analysts.
With the AIG-related non-agency mortgage-backed securities being off-loaded by a vehicle called Maiden Lane II at “sizable clips, we see no reason why this wouldn’t be expanded to ML1’s agency MBS,” Anish Lohokare and Timi Ajibola, the New York-based analysts at BNP, France’s largest bank, wrote in an April 21 report. ML1 refers to Maiden Lane, sometimes called Maiden Lane I.
Jack Gutt, a New York Fed spokesman, declined to comment.
Dealers auctioned off slices of collateralized mortgage obligations held by Maiden Lane with a total notional size of about $400 million this week, according to three people familiar with the sale who declined to be identified because the transaction was private.
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