Maiden Lane Transactions
Encyclopedia
Maiden Lane Transactions refers to three limited liability companies
created by the Federal Reserve Bank of New York
in 2008 as a financial vehicle to facilitate transactions involving three entities: the former Bear Stearns
company as the first entity, the former American International Group
's lending division as the second, and the former American International Group's credit default swap division as the third. The name Maiden Lane
was taken from a street which runs beside New York Federal Reserve in Manhattan
.
During the third quarter of 2007 and continuing through 2008, the market value of the CDOs underlying these swap contracts fell.
As the value of the underlying CDOs fell, AIG had to honor credit default swap
contracts and make collateral payments.
During the nine months ending September 30, 2008, AIG posted in excess of $52 billion of collateral to counterparties. Maiden Lane III purchases of CDOs provide a cap on collateral payments related to said swap contracts.
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. Bloomberg
, citing Bank of America
analysts, reported on October 2, 2008, that the Federal Reserve might stand to lose $2 to $6 billion on the asset porfolio. An October 7, 2010 update to the Federal Reserve balance sheet, as of October 6, 2010, reported the fair market value of net portfolio holdings were valued at $28.478 billion.
The Maiden Lane name has been used for a series of bailouts including Maiden Lane II LLC and Maiden Lane III LLC. Maiden Lane was organized as Delaware
Limited Liability Company
on April 29, 2008, and registered to do business as a foreign limited liability company in the state of New York on June 26, 2008. The registered agent of Maiden Lane LLC is the CT Corporation.
A news story dated March 16, 2009, stated Maiden Lane II used billions in bailout money to purchase toxic assets, and that AIG used billions to pay other banks, including foreign banks--France's Societe Generale at $11.9 billion, Germany's Deutsche Bank at $11.8 billion, and Britain's Barclays PLC at $8.5 billion. AIG, through this fund also funneled significant bailout money to U.S. banks that had already been bailed out themselves under the Troubled Asset Relief Program. As AIG counterparties, Goldman Sachs got $12.9 billion, Bank of America got $5.2 billion, and Citigroup got $2.3 billion all at 100% on the dollar.
The March 16, 2009 article was critical of AIG's plan to pay in excess of $170 million as bonuses to AIG employees.
This was the second in a series of LLC companies formed to deal with the bank bailouts.
created when American International Group Inc. (AIG) was taken over by the U.S. government in September 2008. It was formed by a $24.3 billion loan from the Federal Reserve. Similar to Maiden Lane II, Maiden Lane III LLC aims to purchase multi-sector collateralized debt obligation
s (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. An October 7, 2010 update to the Federal Reserve balance sheet, as of October 6, 2010, reported the fair market value of net portfolio holdings were valued at $23.003 billion.
Limited liability company
A limited liability company is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions...
created by the Federal Reserve Bank of New York
Federal Reserve Bank of New York
The Federal Reserve Bank of New York is one of the 12 Federal Reserve Banks of the United States. It is located at 33 Liberty Street, New York, NY. It is responsible for the Second District of the Federal Reserve System, which encompasses New York state, the 12 northern counties of New Jersey,...
in 2008 as a financial vehicle to facilitate transactions involving three entities: the former Bear Stearns
Bear Stearns
The Bear Stearns Companies, Inc. based in New York City, was a global investment bank and securities trading and brokerage, until its sale to JPMorgan Chase in 2008 during the global financial crisis and recession...
company as the first entity, the former American International Group
American International Group
American International Group, Inc. or AIG is an American multinational insurance corporation. Its corporate headquarters is located in the American International Building in New York City. The British headquarters office is on Fenchurch Street in London, continental Europe operations are based in...
's lending division as the second, and the former American International Group's credit default swap division as the third. The name Maiden Lane
Maiden Lane (Manhattan)
Maiden Lane is an east-west street in the Financial District of the New York City borough of Manhattan. Its eastern terminus is at South Street, near the South Street Seaport...
was taken from a street which runs beside New York Federal Reserve in Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
.
History
The Financial Products group of AIG collected premiums from counterparties by entering into credit default swap contracts on CDOs.During the third quarter of 2007 and continuing through 2008, the market value of the CDOs underlying these swap contracts fell.
As the value of the underlying CDOs fell, AIG had to honor credit default swap
Credit default swap
A credit default swap is similar to a traditional insurance policy, in as much as it obliges the seller of the CDS to compensate the buyer in the event of loan default...
contracts and make collateral payments.
During the nine months ending September 30, 2008, AIG posted in excess of $52 billion of collateral to counterparties. Maiden Lane III purchases of CDOs provide a cap on collateral payments related to said swap contracts.
Maiden Lane LLC
Maiden Lane LLC is the first holding company bearing the name that was created when JPMorgan Chase took over Bear StearnsBear Stearns
The Bear Stearns Companies, Inc. based in New York City, was a global investment bank and securities trading and brokerage, until its sale to JPMorgan Chase in 2008 during the global financial crisis and recession...
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
Federal Reserve Bank of New York
The Federal Reserve Bank of New York is one of the 12 Federal Reserve Banks of the United States. It is located at 33 Liberty Street, New York, NY. It is responsible for the Second District of the Federal Reserve System, which encompasses New York state, the 12 northern counties of New Jersey,...
extended a $30 billion credit line to the limited liability company
Limited liability company
A limited liability company is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions...
to facilitate the unwinding of these assets over time. Bloomberg
Bloomberg L.P.
Bloomberg L.P. is an American privately held financial software, media, and data company. Bloomberg makes up one third of the $16 billion global financial data market with estimated revenue of $6.9 billion. Bloomberg L.P...
, citing Bank of America
Bank of America
Bank of America Corporation, an American multinational banking and financial services corporation, is the second largest bank holding company in the United States by assets, and the fourth largest bank in the U.S. by market capitalization. The bank is headquartered in Charlotte, North Carolina...
analysts, reported on October 2, 2008, that the Federal Reserve might stand to lose $2 to $6 billion on the asset porfolio. An October 7, 2010 update to the Federal Reserve balance sheet, as of October 6, 2010, reported the fair market value of net portfolio holdings were valued at $28.478 billion.
The Maiden Lane name has been used for a series of bailouts including Maiden Lane II LLC and Maiden Lane III LLC. Maiden Lane was organized as Delaware
Delaware
Delaware is a U.S. state located on the Atlantic Coast in the Mid-Atlantic region of the United States. It is bordered to the south and west by Maryland, and to the north by Pennsylvania...
Limited Liability Company
Limited liability company
A limited liability company is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions...
on April 29, 2008, and registered to do business as a foreign limited liability company in the state of New York on June 26, 2008. The registered agent of Maiden Lane LLC is the CT Corporation.
Maiden Lane II LLC
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 with a $19.5 billion loan to purchase these RMBS. On December 12, 2008, the Federal Reserve Bank of New York began extending credit to Maiden Lane II LLC. An October 7, 2010 update to the Federal Reserve balance sheet, as of October 6,2010, reported the fair market value of net portfolio holdings were valued at $15.847 billion.A news story dated March 16, 2009, stated Maiden Lane II used billions in bailout money to purchase toxic assets, and that AIG used billions to pay other banks, including foreign banks--France's Societe Generale at $11.9 billion, Germany's Deutsche Bank at $11.8 billion, and Britain's Barclays PLC at $8.5 billion. AIG, through this fund also funneled significant bailout money to U.S. banks that had already been bailed out themselves under the Troubled Asset Relief Program. As AIG counterparties, Goldman Sachs got $12.9 billion, Bank of America got $5.2 billion, and Citigroup got $2.3 billion all at 100% on the dollar.
The March 16, 2009 article was critical of AIG's plan to pay in excess of $170 million as bonuses to AIG employees.
This was the second in a series of LLC companies formed to deal with the bank bailouts.
Maiden Lane III LLC
Maiden Lane III LLC is a holding companyHolding company
A holding company is a company or firm that owns other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself; rather, its purpose is to own shares of other companies. Holding companies allow the reduction of risk for the owners and can allow...
created when American International Group Inc. (AIG) was taken over by the U.S. government in September 2008. It was formed by a $24.3 billion loan from the Federal Reserve. Similar to Maiden Lane II, Maiden Lane III LLC aims to purchase multi-sector collateralized debt obligation
Collateralized debt obligation
Collateralized debt obligations are a type of structured asset-backed security with multiple "tranches" that are issued by special purpose entities and collateralized by debt obligations including bonds and loans. Each tranche offers a varying degree of risk and return so as to meet investor demand...
s (CDOs) on which the Financial Products group of AIG had written credit default swap
Credit default swap
A credit default swap is similar to a traditional insurance policy, in as much as it obliges the seller of the CDS to compensate the buyer in the event of loan default...
contracts. On November 25, 2008, the Federal Reserve Bank of New York
Federal Reserve Bank of New York
The Federal Reserve Bank of New York is one of the 12 Federal Reserve Banks of the United States. It is located at 33 Liberty Street, New York, NY. It is responsible for the Second District of the Federal Reserve System, which encompasses New York state, the 12 northern counties of New Jersey,...
began extending credit to Maiden Lane III LLC. An October 7, 2010 update to the Federal Reserve balance sheet, as of October 6, 2010, reported the fair market value of net portfolio holdings were valued at $23.003 billion.
External links
- Federal Reserve Bank of New York - Maiden Lane Transactions
- FRB: H.4.1 Release-- Factors Affecting Reserve Balances -- July 3, 2008
- Federal Reserve Bank of New York's Summary of Maiden Lane Transactions
- "Federal Reserve Bank: H.4.1 Release -- Factor Affecting Reserve Balances"
- http://news.yahoo.com/s/ap/20090316/ap_on_re_us/aig_bailout
- "Federal Reserve Bank: H.4.1 Release -- Factor Affecting Reserve Balance".
- "SIGTARP Report 10-003 - Factors Affecting Efforts to Limit Payments"