AIG Offers to Buy Subprime Portfolio from NY Fed for $15.7 Billion

When I saw the headline at CNBC earlier, I couldn't believe my eyes.

Here's a more sarcastic headline from Zero Hedge (3/10/2011):

AIG Goes For Re-Broke, Offers To Repurchase Toxic Subprime Portfolio From Fed For $15.7 Billion

When a bankrupt zombie company offers to purchase from the Fed the very instruments that put it in bankruptcy in the first place, and which the Fed was forced to put on US taxpayers in order to perpetuate the status quo farce, you know the words Banana republic don't even start to begin to express the describe the lunacy we live in.

From Reuters:

• Submits offer to buy all of rmbs owned by Maiden lane II for $15.7 billion in cash
• If accepted, this offer will substantially reduce the amount of outstanding government assistance to AIG
• If accepted, offer will guarantee frbny earns a profit on its interest in Maiden lane II
• Says total outstanding assistance from U.S. government will be reduced by about $13 billion to total of about $26 billion
• Says conditions that necessitated Maiden lane II have been resolved
• Aig's outstanding assistance from the U.S. government totals approximately $39 billion
• Says is offering to purchase all of the approximately 800 rmbs owned by Maiden lane II in a single transaction
• Anticipates more than 98 percent of Maiden lane II securities will be classified as naic 1 securities by regulators
• Says does not expect the transaction to have a material effect on its ratings
• Says set aside the cash necessary to pay the purchase price in full

Incidentally, $15.7 billion is below the value the Fed has Maiden Lane II marked at as of today, which is $15.9 billion. We are confident that this will not prevent the Fed from doing everything in its power to bend over to the nationalized insurer's demands.

Read the whole article at the link, which also reminds us why Maiden Lane II was created to begin with.

What's really hilarious about it is that AIG believes 98% of the toxic crap will be classified as "naic 1" securities. Here's the definition of "naic 1" according to NAIC (National Association of Insurance Commissioners):

NAIC `1' - Assigned to obligations exhibiting the highest quality. Credit risk is at its lowest and the issuer's credit profile is stable.

Now let's laugh out loud, rolling on the floor laughing our a-- off! LOLOLOLOLOL....

It is surreal. AIG is 79.9% owned by the US government, by the way.

Tweet