The Federal Reserve has reported a paper profit for the first time on all the holdings of securities bought from failed American International Group and Bear Stearns Cos., thanks to a rise in the value of the mortgage-related securities that caused the demise of the investment bank and the near-collapse of the insurer.

Fed documents show a difference between the market value of these assets and the outstanding amount of the authorities’ loans to the vehicles of $10.8 billion, a rise in value of 3 percent, according to the Financial Times and Bloomberg Business Week.

The profit was possible because most of the securities, all of which fell sharply in value during the credit crunch, continued paying interest and dividends, money the Fed used to reduce the outstanding amounts of the loans.

In theory, the profit should allow the Fed to sell all its holdings in the market and repay the loans, which have maturities of between six and 10 years. However, because the securities are complex and illiquid, a quick sale is unlikely.

The increase in the value of the assets lends some credibility to Fed promises that U.S. taxpayers will be repaid for loans the Fed made in 2008 to create the corporations set up to hold assets from Bear and AIG, which have an outstanding principal balance of $58.3 billion.

The net holdings of Maiden Lane I, II and III, the corporations set up to hold assets from Bear and AIG, rose by $2 billion to $69.1 billion.

The Bear Stearns investments increased to $29.4 billion, while the two AIG portfolios rose to $39.7 billion.

Maiden Lane II and III, which house AIG assets, has been showing a paper profit for some time, and Maiden Lane I recently swung into the black.

The potential for growth is somewhat slower than it was two to three years ago, St. Louis Federal Reserve President James Bullard told CNBC.

Bullard said that the best course to avoid deflation would be for the Fed to revive its security-purchase program, by purchasing Treasuries, rather than continuing to rely on monetary policy and insisting that rates will remain low for "an extended period," The Wall Street Journal reports.