More "Bailout" Monies Repaid to Fed

Financial institutions that received emergency funds from the Federal Government during the financial meltdown of 2008 continue to repay that debt to the Federal Reserve Bank of New York.  Yesterday Maiden Lane LLC (ML) and Maiden Lane III LLC (ML III) fully repaid their obligations with interest.  A third entity, Maiden Lane II LLC, paid off its debt earlier this year. 

The Maiden Lane trio was established by the Fed in April 2008 as "special purpose vehicles" to facilitate the merger of Bear Stearns and JPMorgan Chase.  At the time Chase acquired Bear Stern which was facing imminent bankruptcy, Chase contributed $1 billion and the Fed contributed $29 billion in the form of a senior loan that was used to purchase the asset portfolio of the failing company.  The original amounts the ML and ML III debts were $28.82 billion and $24.3 billion respectively.  The Maiden Lane transactions occurred before the TARP bailouts.

William C. Dudley, president of the New York Fed, said, "This is a major milestone for the Bank and for the public. The successful repayment of the New York Fed's loans to ML LLC and ML III LLC marks the retirement of the last remaining debts owed to the Bank that stemmed from the crisis-era interventions with Bear Stearns and AIG.  The Maiden Lane entities were established to protect the U.S. economy at a time of great economic stress, and I am pleased we were able to accomplish that policy objective and be fully repaid."

The New York Fed, through BlackRock Solutions, will continue to sell the remaining assets from the two portfolios when market conditions provide good value for the public.  There is no fixed timeframe for these sales.  Proceeds from future sales of ML will be used to retire the subordinated loan extended by JPMorgan Chase & Co., after which the New York Fed will receive all residual profits, and proceeds from future sales in ML III will be used to repay the equity contribution extended by AIG, after which the New York Fed will receive two-thirds of residual profits.