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Federal Reserve Board of Governors

Credit and Liquidity Programs and the Balance Sheet

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Support for specific institutions

In the current financial crisis, the Federal Reserve has lent to certain specific institutions in order to avert disorderly failures that could have led to severe dislocations and strains for the financial system as a whole and harmed the U.S. economy. For the same reason, in certain other cases the Federal Reserve has provided support arrangements for certain key firms. This page discusses such actions. Details on the associated risks, interest rates, and collateral for this lending are provided in the collateral and rate setting and risk management sections of this website.

Bear Stearns

To facilitate the acquisition of the Bear Stearns Companies, Inc. by JPMorgan Chase & Co., the Federal Reserve Bank of New York (FRBNY) created and extended credit to Maiden Lane LLC. Maiden Lane LLC is a limited liability company (LLC) formed to acquire certain assets of Bear Stearns and to manage those assets through time to maximize the repayment of credit extended to the LLC and to minimize disruption to financial markets. The terms of the loan to Maiden Lane LLC were disclosed on the FRBNY website.

Because the FRBNY is the primary beneficiary of the LLC, the assets and liabilities of the LLC are consolidated onto the balance sheet of the FRBNY. As a result, the assets of the LLC are presented in tables 1, 9, and 10 of the H.4.1 statistical release. Extra detail on the accounts of Maiden Lane LLC is presented in table 4 of the H.4.1 statistical release. The first line in table 4 presents the "fair value" of the portfolio of assets held by the LLC. Fair value is an estimate of the price that would be received upon selling an asset if the transaction were to be conducted in an orderly market. The next two lines of table 4 present the principal and interest owed to the FRBNY by the LLC.

American International Group

On September 16, 2008, the Federal Reserve announced that it would lend to American International Group, Inc., (AIG) to provide AIG with the time and flexibility to execute a value-maximizing strategic plan. Initially, the FRBNY extended an $85 billion line of credit to the company. On October 8, 2008, the FRBNY was authorized to extend credit to certain AIG subsidiaries against a range of securities. The terms of the loan were disclosed on this website. The credit extended to AIG under both of these programs is presented in table 1 of the H.4.1 and included in "Other loans" loans in tables 9 and 10.

On November 10, 2008, the Federal Reserve and the Treasury announced a restructuring of the government's financial support to AIG. As part of this restructuring, two new LLCs were created. On December 12, 2008, FRBNY began extending credit to Maiden Lane II LLC, a company formed to purchase residential mortgage-backed security (RMBS) assets from AIG subsidiaries. Details of the terms of the loan were published on the FRBNY website.

Because this LLC is consolidated onto the balance sheet of the FRBNY, the loan from the FRBNY to the LLC is not on the balance sheet. To provide details about the loan and other information about the LLC, table 5 in the H.4.1 statistical release provides detail on the principal accounts of Maiden Lane II.

On November 25, 2008, the FRBNY began extending credit to Maiden Lane III LLC, a company formed to purchase multi-sector collateralized debt obligations (CDOs) on which the Financial Products group of AIG had written credit default swap and similar contracts. Details of the terms of the loan were published on the FRBNY website. Because this LLC is consolidated onto the balance sheet of the FRBNY, the loan from the FRBNY to the LLC is not on the balance sheet. To provide details about the loan and other information, table 6 in the H.4.1 statistical release provides detail on the principal accounts of Maiden Lane III.

On March 2, 2009, the Federal Reserve and the Treasury announced a restructuring of the government's assistance to AIG. Specifically, the government's restructuring was designed to enhance the company's capital and liquidity in order to facilitate the orderly completion of the company's global divestiture program.

Citigroup

On November 23, 2008, the Treasury, the Federal Reserve, and the FDIC jointly announced that the U.S. government would provide support to Citigroup to contribute to financial market stability. The terms of the arrangement are disclosed on this website. Because the Federal Reserve has not extended credit to Citigroup under this arrangement, the commitment is not reflected in the H.4.1 statistical release.

Bank of America

On January 16, 2009, the Treasury, the Federal Reserve, and the FDIC jointly announced that the U.S. government would provide support to Bank of America to support financial market stability. The terms of the support were disclosed on this website. Because the Federal Reserve has not extended credit to Bank of America under this arrangement, the commitment is not reflected in the H.4.1 statistical release.

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Last update: April 29, 2009