A look back at an $80 billion taxpayer give-away to JPMorgan and AIG...
The fear among Fed watchers is that the securities held by the 3 Maiden Lane LLCs, are virtually worthless. But it's really just an extrapolation because the Federal Reserve has never released any detail on the securities. Outside of broad classification, we have no fracking idea what was put into these vehicles in the first place.
A few basics:
The original Maiden Lane (ML I) was created to help JP Morgan and Jamie Dimon with its purchase of Bear Stearns. (Not incidentally, Dimon was on the Board of the New York Fed and so had influence on its decision to backstop the deal...wtf? how is it possible that serving on the board of the semi-private bank (NYFed) that regulates your bank (JPM) is not considered a conflict of interest?)
We can presume they are the worst of Bear's assets because they were rejected by JPM and shoved off on B-52 and Kohn. Size is $28.5 billion; likely loss is $20-25 billion. But we don't know, because they won't tell us what securities b-52 keeps in the closet. Recognizing the theme?!!
ML II and III were created to purchase a combined $52.5 billion of the most toxic RMBS (and maybe CMBS, but we aren't sure, again, because they won't reveal any details) on the books at AIG. These were the most radioactive, securitized slogs that Casanno had said one-year before wouldn't cost AIG a dime. Size=$52.5 billion. Potential Loss=$52.5 billion.
This particular confluence of the ugly and the unknown (ML LLC), is exactly why we need an outside, independent audit of the Federal Reserve. They are brazen to the point of despair. Conflicts of interest are apparently required attachments for any one looking to advance at the Fed.
Find out all you want on all 3 Fed versions of Wysteria Lane at the link below. Wait, I lied. Find out all the Fed wants you to know about Maiden Lane is more accurate.
From the New York Fed (there's more information on the site):
In 2008, as part of extending support to specific institutions, under section 13(3) of the Federal Reserve Act, the Federal Reserve Board authorized the New York Fed to facilitate formation of three limited liability companies.
Maiden Lane LLC (ML LLC) was formed to facilitate the merger of the Bear Stearns Companies, Inc. and JPMorgan Chase & Co. The New York Fed extended credit to ML LLC to acquire certain assets of Bear Stearns.
Maiden Lane II LLC (ML II LLC) and Maiden Lane III LLC (ML III LLC) were formed to facilitate the restructuring of the New York Fed’s financial support to American International Group (AIG). The New York Fed extended credit to ML II LLC to purchase residential mortgage-backed securities from the securities lending portfolio of several regulated U.S. insurance subsidiaries of AIG. The New York Fed extended credit to ML III LLC to purchase multi-sector collateralized debt obligations from certain counterparties of AIG Financial Products Corp.