AIG Offers to Buy Back Bonds
Author: Serena Ng</br></br>American International Group Inc., once hobbled by its bets on the mortgage market, is trying to buy back a large portfolio of subprime mortgage bonds from the Federal Reserve Bank of New York, which acquired the securities as part of the insurer's massive bailout in 2008.</br></br>AIG on Thursday offered to pay $15.7 billion for all the securities in a company called Maiden Lane II LLC, the insurer said in a regulatory filing. The company is hoping to use cash from its insurance businesses, mainly its life-insurance units, to buy the mortgage bonds, which are yielding relatively attractive returns in today's low-interest-rate environment.</br></br>It is unclear if the central bank will accept the offer. "Any decision on a possible disposition of these assets will be made in a way that maximizes the proceeds to the taxpayer and that is consistent with the goal of fostering financial stability," the Federal Reserve said in a statement released Friday morning. The Fed noted it has been aware of AIG's interest in the Maiden Lane II assets "for some time."</br></br>The New York Fed set up Maiden Lane II in late 2008 to purchase from AIG roughly 800 securities backed by mostly subprime home loans; the move stemmed the insurer's cash bleed from a business known as securities lending.