* Public realizes net gain of about $2.8 bln from sale
* Credit Suisse buys portfolio with $6 billion face value
* NY Fed says auction for last portion of bonds was heated
By Carrick Mollenkamp and Jonathan Spicer
NEW YORK, Feb 28 The Federal Reserve Bank
of New York on Tuesday sold the remaining portion of
mortgage-backed securities acquired in the 2008 rescue of
American International Group Inc.
The sale to a unit of Credit Suisse Group AG
means the U.S. government has recovered the entire $19.5 billion
loan made at the height of the financial crisis - with interest.
"The completion of the sale of the Maiden Lane II
portfolio has resulted in significant gains for the public and
marks an important milestone in the wind-down of the
extraordinary interventions necessitated by the financial
crisis," New York Fed President William Dudley said in a
Taxpayers will enjoy a net gain of about $2.8 billion
from the sale of the entire portfolio, according to the New York
The bonds, with a current face value of $6 billion,
were purchased by Credit Suisse Securities (USA) amid heavy
bidding. Other bidders were Royal Bank of Scotland Group's RBS
Securities, Barclays Plc, Bank of America
Corp's Merrill Lynch broker and Morgan Stanley & Co.
The transaction, which liquidates bonds held in a
portfolio known as Maiden Lane II LLC, was prompted by an
unsolicited offer from Morgan Stanley to BlackRock Solutions,
the investment manager for the portfolio, according to the New
Credit Suisse, which in January also bought the first
tranche of Maiden Lane bonds with a face value of $7 billion,
said "a significant portion" of the securities were already
spoken for by clients, adding it plans to distribute the rest in
the near future.
Goldman Sachs Group Inc, which bought $6.2 billion
worth of the residential mortgage-backed securities earlier this
month, was not involved in the New York Fed's latest auction,
said one source.
In the last two auctions, the New York Fed did not reveal
sale prices nor the specific bonds, but said on both occasions
it represented "good value for the publ ic."
The bank said on Tuesday that it
moved ahead with the final leg of the bond sale "only after
determining that the winning bid represented good value for the
Maiden Lane II was created to absorb risky mortgage
securities from AIG, helping to prevent the collapse of
what was then the world's largest insurer. In March last year,
the New York Fed rejected AIG's $15.7 billion bid to buy the
portfolio, saying it would sell off the bonds over time instead.
Last week, AIG said that it would retain one-sixth of the
profit on the sale of the portfolio.
The company said it was required to use any such proceeds to
help pay down the U.S. Treasury's preferred interest in a
special purpose vehicle that holds some AIG assets.
After having trouble selling the mortgage securities last
year, the New York Fed has had better luck this year as the
market for such bonds warmed up.
The collapse of the U.S. housing market was at the heart of
the 2007-2009 recession and the global financial crisis.