Tags: Goldman | NY | Fed | AIG

Goldman Sachs Said to Offer Bid for New York Fed’s AIG Assets

Friday, 13 Jan 2012 02:48 PM

 

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink

Goldman Sachs Group Inc. approached the Federal Reserve Bank of New York with a bid for a block of the mortgage bonds assumed from American International Group Inc., prompting the central bank to weigh an auction of the debt, three people familiar with the matter said.

The central bank may sell securities held by its Maiden Lane II vehicle with a face value of about $7 billion, said the people, who declined to be identified because the deliberations are private. New York-based Goldman Sachs may have sought the bonds for itself or clients, they said. Four or five dealers may be asked to assemble bids this month, they said.

“Goldman’s never been bashful, I call them opportunistic as a compliment,” Steven Delaney, an analyst at San Francisco- based JMP Securities LLC who covers real estate investment trusts that invest in mortgages, said today on Bloomberg Television. “But Goldman’s not the only major investor that sees value” in U.S. home-loan bonds with government backing after prices slumped, he said.

Michael DuVally, a spokesman for Goldman Sachs, declined to comment, as did the New York Fed’s Jack Gutt and Mark Herr of New York-based AIG. The Wall Street Journal reported yesterday the potential sale and Goldman Sachs’s bid.

The New York Fed halted in June a plan to sell the Maiden Lane II assets through a series of auctions after its sales of about $10 billion roiled markets, dragging down everything from high-yield corporate bonds to commercial-mortgage securities as Wall Street dealers sought to reduce risk after building their inventories. AIG turned over the holdings to the New York Fed in 2008 as part of its rescue.

‘Market Conditions’

The central bank said last year it might resume selling the bonds “individually and in segments over time as market conditions warrant through a competitive sales process.” Securities with a face value of $21 billion remained when the auctions were halted. The Fed valued the Maiden Lane II holdings at about $9.1 billion as of this week.

Values of so-called non-agency mortgage securities fell further and trading shriveled as Europe’s debt crisis intensified after the end of the auctions. Paul Norris, a senior money manager at Burlington, Vermont-based Dwight Asset Management Co., said that because the prospect of additional Fed sales has been weighing on the market, a successful auction could be positive.

In a “disaster” scenario, a Fed sale could disrupt the market again by creating too much supply, said Norris, whose firm manages and advises on more than $50 billion of assets.

The portfolio includes securities backed by the types of home loans with some of the highest default rates, such as so- called subprime, Alt-A and option adjustable-rate mortgage debt. The New York Fed began unloading the bonds piecemeal in April after rejecting a $15.7 billion bid from AIG for the entire pool the previous month.

Adjustable-Rate Mortgages

A rout in the market for the bonds has eased, with typical prices of top-ranked securities tied to Alt-A ARMs unchanged at 48 cents on the dollar in the month ended Jan. 4, according to Barclays Capital data. The bonds had plunged from last year’s high of 68 cents in February. Alt-A loans fall between prime and subprime in terms of expected defaults.

A Fed auction may help the $1.1 trillion market for non- agency securities by offering new information on current values, JMP’s Delaney said. Trading has been limited in recent months, he said.

If the portfolio is sold to an individual investor or group assembled by dealers in an “all-or-nothing” process, that may obscure bids on specific securities and “a lack of price discovery is inherently not good,” said Adam Murphy, president of Empirasign Strategies LLC, a New York-based provider of data on securitization-market trading.

© Copyright 2014 Bloomberg News. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

US Navy Must Contend With China

Thursday, 28 Aug 2014 10:12 AM

Russia's ongoing dismemberment of Ukraine and the Islamic State's erasing of Middle Eastern borders have distracted atte . . .

Criminal Justice Act Celebrates 50 Years

Monday, 25 Aug 2014 08:31 AM

The adversarial process, the foundation of our criminal justice system, has become an inquisitorial process that fails t . . .

Nanny State Quickly Becomes Govt Overreach

Thursday, 21 Aug 2014 09:57 AM

Washington's response to the menace of school bake sales illustrates progressivism's ratchet: The federal government sub . . .

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved