US insurer American International Group has offered to buy back US$15.7 billion in mortgage-backed securities from the central bank as part of its efforts to emerge from a government bailout.
In a filing on Thursday to US market regulators, AIG offered the Federal Reserve Bank of New York (FRBNY) to purchase all of the residential mortgage-backed securities in Maiden Lane II, a special entity created to house toxic assets in the government’s 2008 rescue of the foundering insurance giant.
“AIG believes this offer is in the best interest of the US taxpayers, the US government and AIG itself,” AIG president and chief executive Robert Benmosche said in the letter to the New York Fed filed with the Securities and Exchange Commission.
“If accepted, this offer will substantially reduce the amount of outstanding government assistance to AIG [and] help AIG ensure that the US government recoups all of the money it has invested in AIG,” the company said.
It will also “guarantee that the Federal Reserve Bank of New York earns a profit on its interest in Maiden Lane II while reducing the amount of AIG-related assets on the FRBNY’s balance sheet.”
The Fed would gain a US$1.5 billion profit on the deal, and it would reduce AIG’s debt to the government by US$13 billion to US$26 billion, AIG said.
The outstanding debt includes Maiden Lane III, another special entity created to house AIG’s toxic credit-default swap assets.
Confirming the offer, the New York Fed on Friday said any decision “will be made in a way that maximizes the proceeds to the taxpayer and that is consistent with the goal of fostering financial stability.”
If the New York Fed accepts the offer, it “will accelerate the time period within which the US -government will be able to terminate all of its assistance to AIG,” the firm wrote.
For AIG, the Maiden Lane II securities present an “attractive” profile.
The company “has extensively evaluated the risk in the portfolio and has determined it is within AIG’s overall risk tolerance for residential mortgage risk.”
The company said it did not expect the transaction to have a significant effect on its credit ratings from rating agencies.
On Tuesday, AIG repaid US$6.9 billion to the US Treasury, using proceeds from the sale of its stake in industry rival MetLife.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
RSS