|
May 11, 2012 The Federal Reserve Bank of New York said it sold parts of twocollateralized debt obligations to Bank of America Corp. (BAC),giving the lender at least a temporary stake in some of the fundsthat objected to its proposed $8.5 billion home-loan bondsettlement. Winning bids that were materially higher than the prices theFed paid demonstrate continued interest in these assets andrepresent good value for the public, William C. Dudley, presidentof the New York Fed, said in a statement on its website. Audio Download: RDQ s Ryding Says Fed Will Not Engage in More QE.The district bank said May 4 it was inviting nine broker- dealersto compete for the so-called Triaxx CDOs that are backed byresidential-mortgage notes and held within its Maiden Lane III LLCportfolio, which acquired the securities in the 2008 governmentrescue of American International Group Inc. (AIG) It said it hadreceived unsolicited bids for the assets. The New York Fed has been selling debt acquired in the AIG bailoutin response to demand this year, using brokers as intermediaries.It halted a series of 2011 auctions in June after they were blamedfor roiling credit markets. Barclays Plc and Deutsche Bank AG (DB)teamed up last month to buy $7.5 billion of CDOs tied to commercialmortgages. The banks broke apart the transactions, selling theunderlying bonds to investors. Elevated Demand While the feasibility of collapsing the Triaxx CDOs forrestructuring purposes remains to be seen, we expect there shouldbe healthy demand from investors, Bank of America analysts led byChris Flanagan wrote in a May 4 report. The non-solicited bids for the debt showed the elevated demand for high quality paperthat provides yield in the current zero interest-rateenvironment. The Fed sold $19.2 billion of home-loan bonds to Credit SuisseGroup AG and Goldman Sachs Group Inc. in January and February,helping unwind its separate Maiden Lane II LLC vehicle at a profitof $2.8 billion for taxpayers. Maiden Lane III acquired CDOs thatsliced mainly mortgage-backed securities into new bonds withvarying risks. Maiden Lane II held securities that packagedindividual home loans. The outstanding balance of Triaxx CDOs in Maiden Lane III totaled$2.5 billion as of March 31, according to data posted on the NewYork Fed s website. John Yiannacopoulos, a spokesman forCharlotte, North Carolina-based Bank of America, declined tocomment. Faulty Bonds In August, three Triaxx CDOs, including the two whose parts the Fedsold today, joined investors including AIG trying to intervene in acourt case seeking approval for Bank of America s proposed $8.5billion settlement over faulty mortgage bonds created byCountrywide Financial Corp. The bank bought the lender in 2008. The CDOs, represented by lawyers from Miller & Wrubel PC, saidin a filing that many observers believe the amount was toosmall, and they held $2.2 billion in affected securities. The New York Fed s three Maiden Lane vehicles were part of thegroup of 22 bondholders including BlackRock Inc. and MetLife Inc.(MET) that negotiated the agreement, which is still before a statejudge. The more mortgage repurchases forced by lenders flawedunderwriting, the better for the Triaxx CDOs, because the putbacks reduce losses on bonds they hold, said Manal Mehta, apartner in San Francisco at hedge fund Branch Hill Capital, whichhas bet against Bank of America. Taxpayer Bailout Some of the risk held in CDOs insured by AIG was created throughcredit-default swaps duplicating actual securities, sometimesseveral times, according to Mehta. If every dollar of putbacks issuccessful, would AIG have required as big of a taxpayer bailout? The Triaxx deals differ from most of the CDOs insured by AIG andlater taken over by the Fed by containing more higher- qualitysecurities backed by so-called prime jumbo mortgages, rather thanriskier subprime debt. About 35 percent of the collateral of one of the Triaxx CDOs isjumbo bonds and 30 percent of the other, with the rest mainly tiedto so-called Alt-A loans, according to the Bank of America report.Countrywide services 34 percent of the underlying loans and Bank ofAmerica about 4 percent, according to the report. Jumbo loans are larger than allowed in government-supportedprograms, currently as much as $729,750 for Federal HousingAdministration debt for single-family properties in some areas.Alt-A mortgages fall between prime and subprime in terms ofexpected defaults. AIG shares rose 1 percent to $32.14 as of 4:15 p.m. in New Yorktrading. The e-commerce company in China offers quality products such as Japanese Cell Phone Stickers Manufacturer , Laptop Notebook Skin Sticker Cover, and more. For more , please visit Polish Nail Sticker today!
Related Articles -
Japanese Cell Phone Stickers Manufacturer, Laptop Notebook Skin Sticker Cover,
|
