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N.Y. Fed made $1.2B from AIG asset sales in 2012


NEW YORK (Reuters)—The Federal Reserve Bank of New York made $1.2 billion from this year's sales of mortgage-backed securities it acquired in the government's 2008 bailout of American International Group Inc., once the world's largest insurer.

According to financial statements released on Tuesday, the proceeds exceeded the fair value of the assets as of Dec. 31, 2011, and were used to fully repay the senior loan made by the regional Fed bank, the purchase price of the assets in the Maiden Lane II L.L.C. portfolio, which was created to absorb risky mortgage securities from AIG, and interest.

Part of the $1.2 billion will also provide "residual income," according to the New York Fed's fiscal statements for 2010 and 2011.

The New York Fed, which handles the U.S. central bank's open market activity, sold the last of the securities in the Maiden Lane II portfolio in three auctions in January and February.

Credit Suisse Group A.G. bought some $13 billion of the assets, and Goldman Sachs Group Inc. ended up with $6.2 billion. Those sales reflected how the market for such bonds has warmed since risky bets in the subprime mortgage market helped trigger the 2007-2009 financial crisis.

Last month, the Fed bank said taxpayers enjoyed a net gain of about $2.8 billion in total from the sales. That figure included last year's auctions as well as accrued interest on the loan it made to Maiden Lane II.

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