Fed Sells 42 AIG Bonds in Auction


The Federal Reserve said it auctioned off 42 mortgage-backed bonds it acquired as part of the rescue of American International Group. The bonds had a face value of $1.326 billion.

The prices paid for the bonds, however, won't be released until the entire $30 billion portfolio has been sold. Bidders are expected to pay far less than face value for the assets, many of which were once considered "toxic." Blackrock is running the auction.

Some participants might not yet know whether their bids won. Banks and hedge funds participating in the auction expected to learn whether their bids had been accepted 90 minutes after they submitted them.

Dow Jones is reporting that the announcement of the winning bids has been delayed. It’s not clear how long the story will be delayed.

The Fed acquired the mortgage-related assets as it unwound the trading positions of AIG as part of an emergency bailout and takeover in 2008. It holds them in a facility it calls Maiden Lane II. Earlier this year, AIG offered to buy the assets from the Fed. The Fed turned down this request and announced it would hold auctions for the assets instead.

Ten of the bonds, with a face value of approximately $170 million, that the Fed attempted to sell in the auction went unpurchased.


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