The New York Federal Reserve has released details on toxic asset purchases from Bear Stearns and AIG, now held in Maiden Lane, LLC. The asset lists are at the link on the New York Federal Reserve website.
The release of this information today comes after reaching agreement on issues of confidentiality with JPMorgan Chase with respect to the assets of ML and the American International Group, Inc. (AIG) with respect to ML II and ML III.
As part of extending support to specific institutions, under section 13 (3) of the Federal Reserve Act, the Board of Governors of the Federal Reserve System in 2008 authorized the New York Fed to facilitate lending to three limited liability companies—ML, ML II and ML III. ML was formed to facilitate the merger of The Bear Stearns Companies, Inc. and JPMorgan Chase. The New York Fed extended credit to ML to acquire certain assets of Bear Stearns.
In talking about the pressures from Congress as well as suing for the information, Bloomberg has already sorted through some details in the disclosures:
The Fed’s vehicle known as Maiden Lane LLC has securities backed by mortgages from lenders including Washington Mutual Inc. and Countrywide Financial Corp., loans that were made with limited borrower documentation. More than $1 billion of them are backed by “jumbo” mortgages written by Thornburg Mortgage Inc., which now carry the lowest investment-grade rating. Jumbo loans were larger than government-sponsored mortgage buyers such as Fannie Mae could finance -- $417,000 at the time.
For example, 94 percent of the mortgages in one security, called WAMU 06-A13 2XPPP, required limited documentation from borrowers, meaning the lender often didn’t ask customers for proof of their incomes. Almost 10 percent of the borrowers whose mortgages make up the security have been foreclosed on, and almost a quarter are more than two months late with payments, according to data compiled by Bloomberg.
The portfolio also includes $618.9 million of securities backed by Countrywide, mortgages now rated CCC, eight levels below investment grade. All the underlying loans are adjustable- rate mortgages, with about 88 percent requiring only limited borrower documentation, according to Bloomberg data. About 33.6 percent of the borrowers are at least 60 days late. Countrywide is now part of Charlotte, North Carolina-based Bank of America Corp.
Maiden Lane has $19.5 million of securities from a series of collateralized debt obligations called Tropic CDO that are backed by trust preferred securities of community banks and thrifts. CDOs are investment pools made up of a variety of assets that provide a flow of cash.
Reuters has already started describing the declining value of this asset portfolio, released by the Federal Reserve:
The New York Fed lists the notional, or face value, of the portfolio at $74.8 billion, which is some indication of just how distressed the assets were when the New York Fed set-up Maiden Lane in March 2008.
But the notional value can be a bit misleading given the wide range of assets that includes everything from government debt to harder-to-price synthetic CDOs and swaps.
Either way, the assets in the portfolio have continued to decline in value since the New York Fed acquired them. At the end of last year, the New York Fed reported the portfolio's value at roughly $27 billion.
This is billions in CDSes, bad mortgages and other toxic waste that the Fed just outright bought from these financial institutions and were purchased as "full value".
And of the toxic stuff that has been sold? Guess who is holding the money, come on, you can guess, Goldman Sachs that's right.
Such a circle jerk. No wonder the Federal Reserve wants to keep it's secrets. Frankly no one would do that in public.