FEDERAL RESERVE WEIGHS SALE OF AIG MORTGAGE BONDS

The New York branch of the US Federal Reserve is considering a sale of a block of mortgage bonds that were assumed from AIG during the course of the insurer’s 2008-2009 bailout by the Fed and US Treasury, Bloomberg has reported. Citing two people familiar with the matter, the report said that the Fed is weighing a one-time auction of around $7bn of the mortgage securities after having been approached by an unidentified potential buyer. Late Thursday, the Wall Street Journal reported that Goldman Sachs made the initial approach, prompting the New York Fed quietly to solicit bids from other securities dealers. The New York Fed began selling off its holdings of AIG’s bonds last spring after rejecting the bailed-out insurer’s offer to repurchase them for $15.7bn. The Fed halted sales in June owing to tumbling prices and the chill on trading created by the European debt crisis. When sales were halted, the Fed still controlled around $21bn of the assets, which are being held in special purpose vehicle Maiden Lane II.