[lbo-talk] CBO on TARP

Jordan Hayes jmhayes at j-o-r-d-a-n.com
Thu Mar 31 07:44:09 PDT 2011


Peter Fay asks:


> Do I have this right?
>
> MaidenLane II assets -
>
> Original face value: $39 billion
> Purchased by the Fed in 2008 to rescue AIG: $22.5 billion
> Current face value: $31 billion
> AIG's offer today to 'take if off the Fed's hands": $15.7 billion

There are some transactions missing here (notably payoffs) but the AIG bid was basically "today's fair value" ... the impression everyone has is that this number will go up over time; if the Fed were a normal investor, and subject to making decisions about investment allocation, it might make sense to offload it for around that price. But they aren't: there's no reason to believe that it would be a good idea for them sell it as a bundle today. Just wait: it pays interest, and it gains value. MLII was capitalized by a loan from NYFED, and the SPV pays interest on that loan ... to NYFED.

I imagine as the SPV gets smaller, it makes less and less sense to hold onto it as a legal entity: there are not-insignificant expenses involved in keeping it open, so winding it down will be a good idea soon. But maybe not this year, or even the next.

/jordan



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