AIG Continues Bailout Repayment Efforts

Money Morning submits:

By Kerri Shannon

American International Group Inc. (NYSE: AIG) on Thursday offered to pay $15.7 billion for a portfolio of mortgage-backed securities the Federal Reserve Bank of New York acquired when it bailed out the collapsing insurer during the financial crisis.

The New York Fed set up the fund, named Maiden Lane II, in 2008 to buy from AIG about 800 securities that were backed by subprime home loans.

"The conditions that necessitated Maiden Lane II in the first place have been resolved," AIG said in a letter Thursday to the New York Fed. The company said it is now more stable and can match the assets with "appropriate longer-term insurance liabilities, not shorter-term liabilities."

AIG originally purchased the mortgage-backed securities with collateral from Wall Street banks in securities-lending deals. When the housing market collapsed, AIG couldn't reimburse banks that wanted their collateral back. The Fed bought the bonds at


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