Getty Images

Top hedge fund managers are eager to bid on subprime-mortgage bonds that once threatened to wipe out AIG and are now held by the Federal Reserve.

“Champing at the bit,” is how one hedge fund trader who invests in distressed debt put it.

The Wall Street Journal reported Friday that the Fed had tapped asset management firm BlackRock to help sell off portions of the $30 billion Maiden Lane II portfolio, which is made up of bonds and derivatives acquired when the government bailed out American International Group.

Earlier this month, AIG offered to buy the bonds from the Fed for $15.7 billion—about half their face value.

People familiar with the matter say the interested hedge funds include John Paulson’s Paulson & Co, Jeff Gundlach’s DoubleLine Capital LP, Mark Lasry's Avenue Capital Group and Oaktree Capital Management. The funds either could not be reached or declined to comment. They declined to comment for competitive reasons.

“Any transaction of this size should have folks licking their chops,” one prominent fund manager said.

PIMCO is also expected to be a bidder at the auctions, according to sources. BlackRock might also bid—despite the fact that it is running the auction. The division of BlackRock bidding on the assets would have to be walled off from the division running the auction, a person familiar with the matter said.

Big money managers may decide to team up with CDO managers who specialize in analyzing the underlying the collateral. Top CDO managers include Cohen & Co., Ellington Capital and Trust Company of the West.

Investment banks may also bid. One possible play would be for investment banks to buy large CDO packages and then sell off their constituent bonds—charging upfront fees for the service, of course. Credit traders at Goldman Sachs have been discussing possible deal structures that would allow them to bid, according to a person familiar with the matter. Barclays and Credit Suisse were named by the Wall Street Journal as potential bidders. Morgan Stanley has had discussions with clients about buying assets from the Maiden Lane portfolio, according to the Financial Times. None of the firms would comment on the matter.

“The same guys who packaged this kind of junk will make money unpackaging it,” a hedge fund manager said. “Isn’t capitalism grand?”

____________________________________

Questions? Comments? Email us at

Follow John on Twitter @ twitter.com/Carney

Follow NetNet on Twitter @ twitter.com/CNBCnetnet

Facebook us @ www.facebook.com/NetNetCNBC