[lbo-talk] CBO on TARP

Peter Fay peterrfay at gmail.com
Thu Mar 31 08:21:09 PDT 2011


You're right - I missed that the 'fair market' value is still in the $15's billion.

But it's clear the bonds are worth a heck of a lot more broken up than AIG's bid for the whole lot - the proof is that many others are lined up to get their hands on them. And the Fed got slapped around for originally paying far too much in the 2008 AIG deal. So I should retract the characterization of AIG's offer as "gall" and rephrase it as, "pipe dream".

"A long list of potential bidders has emerged for the bonds, now with a face value of around $30 billion. Barclays (BCS) and Credit Suisse (CS) are both reportedly weighing bids, as is Blackrock, who would actually run the auction, should the Fed choose to auction the assets. The team of bidders for Blackrock would be walled off from the auction team to avoid any conflict of interest. Goldman Sachs and Morgan Stanley are also possible bidders, as is PIMCO, and several large hedge funds are reported as being interested in the auction." http://seekingalpha.com/article/260269-maiden-lane-ii-raises-interest-and-questions

On Thu, Mar 31, 2011 at 10:44 AM, Jordan Hayes <jmhayes at j-o-r-d-a-n.com>wrote:


> 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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-- Peter Fay http://theclearview.wordpress.com



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