Fed may auction off Maiden Lane II bonds: report

NEW YORK Thu Mar 24, 2011 8:49pm EDT

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NEW YORK (Reuters) - The Federal Reserve is mulling over auctioning off a large portfolio of subprime-mortgage bonds and has tapped BlackRock Inc (BLK.N) to help, the Wall Street Journal reported, citing people familiar with the matter.

American International Group Inc (AIG.N) earlier this month formally offered $15.7 billion to buy the bonds from the Fed, which took over the portfolio in 2008 to help the government-controlled insurer survive, the Journal said on Thursday.

Barclays Capital (BARC.L), part of Barclays PLC, also may bid for the portfolio, as may Credit Suisse Group AG (CSGN.VX), the Journal reported people familiar with the matter said.

Some banks may bid on the bonds on behalf of groups of interested buyers such as insurers and other investors, as the portfolio could be too large for one institution, the Journal said.

The bond portfolio, known as Maiden Lane II portfolio, has a face value of roughly $30 billion. An auction could help ensure that taxpayers get a competitive price.

Federal Reserve Bank of New York hired BlackRock in 2008 to manage the bond portfolio.

Should the Fed decide on an auction, it is likely that BlackRock would manage it, the Journal said, citing people familiar with the matter say. They also say that another part of BlackRock, walled off from the group handling the auction, could be eligible to bid on the assets.

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