Full text of Federal Reserve System Monthly Report on Credit and Liquidity Programs and the Balance Sheet : January 2010

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January 2010

Federal Reserve System Monthly Report on

Credit and Liquidity Programs and the
Balance Sheet

Board of Governors of the Federal Reserve System

Purpose
The Federal Reserve prepares this monthly report as
part of its efforts to enhance transparency about the
range of programs and tools that have been implemented in response to the ﬁnancial crisis and to ensure
appropriate accountability to the Congress and the public. The Federal Reserve’s statutory mandate in conducting monetary policy is to foster maximum employment and stable prices. Financial stability is a critical
prerequisite for achieving sustainable economic growth
and price stability, and the steps taken since the summer of 2007 were necessary to support the liquidity of
important ﬁnancial markets and institutions in light of
the extraordinary strains in ﬁnancial markets.
Note: Financial information in this report has not been audited.
Audited ﬁnancial data are prepared annually and are available at
www.federalreserve.gov/monetarypolicy/bst_fedﬁnancials.htm.

This report provides detailed information on the
policy tools that have been implemented since the
summer of 2007. It also provides ﬁnancial reporting
for 2009 through the third quarter. Figures for the full
year of 2009 will be published following the release of
the ﬁnancial statements of the Federal Reserve System.
In fulﬁllment of Section 129 of the Emergency Economic Stabilization Act of 2008, additional information
on the status of certain credit facilities implemented in
response to the ﬁnancial crisis is included as an appendix to this report.
For prior editions of this report and other resources,
please visit the Board’s public website at
www.federalreserve.gov/monetarypolicy/
bst_reports.htm.

Contents
Overview...............................................................................................................................................1
Recent Developments .............................................................................................................................1

System Open Market Account and Liquidity Arrangements with Foreign Central Banks .................4
System Open Market Account (SOMA).....................................................................................................4
Liquidity Swaps ....................................................................................................................................5

Lending Facilities to Support Overall Market Liquidity .....................................................................7
Lending to Depository Institutions............................................................................................................7
Lending to Primary Dealers.....................................................................................................................9
Commercial Paper Funding Facility (CPFF) .............................................................................................11
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF)...............................12
Term Asset-Backed Securities Loan Facility (TALF)..................................................................................13

Lending in Support of Speciﬁc Institutions ........................................................................................17
Quarterly Developments ........................................................................................................................17
Bear Stearns and Maiden Lane LLC .......................................................................................................17
American International Group (AIG) .......................................................................................................18
Maiden Lane II LLC ............................................................................................................................20
Maiden Lane III LLC ...........................................................................................................................21
Citigroup ............................................................................................................................................23
Bank of America..................................................................................................................................23

Federal Reserve Banks’ Financial Tables ...........................................................................................24
Quarterly Developments ........................................................................................................................24
Combined Statement of Income and Comprehensive Income.......................................................................24
SOMA Financial Summary ....................................................................................................................24
Loan Programs Financial Summary.........................................................................................................26
Consolidated Variable Interest Entities (VIEs) Financial Summary ...............................................................27

Appendix.............................................................................................................................................28
Additional Information Provided Pursuant to Section 129 of the Emergency Economic Stabilization Act
of 2008 ...........................................................................................................................................28

Tables and Figures
Overview...............................................................................................................................................1
Table 1. Assets, Liabilities, and Capital of the Federal Reserve System .........................................................1
Figure 1. Credit and Liquidity Programs and the Federal Reserve’s Balance Sheet...........................................2

System Open Market Account and Liquidity Arrangements with Foreign Central Banks .................4
Table 2. System Open Market Account (SOMA) Securities Holdings ............................................................4
Table 3. Amounts Outstanding under Dollar Liquidity Swaps ......................................................................5

Lending Facilities to Support Overall Market Liquidity .....................................................................7
Table 4. Discount Window Credit Outstanding to Depository Institutions ......................................................7
Table 5. Concentration of Discount Window Credit Outstanding to Depository Institutions ...............................7
Table 6. Lendable Value of Collateral Pledged by Borrowing Depository Institutions ......................................8
Table 7. Lendable Value of Securities Pledged by Depository Institutions by Rating ........................................8
Table 8. Discount Window Credit Outstanding to Borrowing Depository Institutions—Percent of
Collateral Used .................................................................................................................................9
Table 9. Credit Outstanding to Primary Dealers .........................................................................................9
Table 10. Concentration of Borrowing at the PDCF and TSLF ...................................................................10
Table 11. PDCF Collateral by Type ........................................................................................................10
Table 12. PDCF Collateral by Rating .....................................................................................................10
Table 13. TSLF Collateral by Type ........................................................................................................11
Table 14. TSLF Collateral by Rating ......................................................................................................11
Table 15. Concentration of CPFF Issuers ................................................................................................11
Table 16. CPFF Commercial Paper Holdings by Type ...............................................................................11
Table 17. CPFF Commercial Paper Holdings by Rating ............................................................................11
Table 18. AMLF: Number of Borrowers and Amount Outstanding ..............................................................12
Table 19. AMLF Collateral by Rating ....................................................................................................12
Table 20. TALF: Number of Borrowers and Loans Outstanding ..................................................................13
Table 21A. Issuers of Non-CMBS that Collateralize Outstanding TALF Loans .............................................14
Table 21B. Issuers of Newly Issued CMBS that Collateralize Outstanding TALF Loans .................................14
Table 21C. Issuers of Legacy CMBS that Collateralize Outstanding TALF Loans .........................................15
Table 22. TALF Collateral by Underlying Loan Type ................................................................................16
Table 23. TALF Collateral by Rating .....................................................................................................16

Lending in Support of Speciﬁc Institutions ........................................................................................17
Table 24. Fair Value Asset Coverage ......................................................................................................17
Table 25. Maiden Lane LLC Outstanding Principal Balance of Loans .........................................................17
Table 26. Maiden Lane LLC Summary of Portfolio Composition, Cash and Cash Equivalents, and
Other Assets and Liabilities ...............................................................................................................17
Table 27. Maiden Lane LLC Securities Distribution by Sector and Rating Percent, as of September 30, 2009 ....18
Figure 2. Maiden Lane LLC Securities Distribution as of September 30, 2009...............................................18
Table 28. AIG Revolving Credit Facility .................................................................................................18

Figure 3. AIG Revolving Credit .............................................................................................................19
Table 29. Maiden Lane II LLC Outstanding Principal Balance of Senior Loan and Fixed Deferred
Purchase Price .................................................................................................................................20
Table 30. Maiden Lane II LLC Summary of RMBS Portfolio Composition, Cash and Cash Equivalents,
and Other Assets and Liabilities .........................................................................................................20
Table 31. Maiden Lane II LLC Securities Distribution by Sector and Rating ................................................21
Figure 4. Maiden Lane II LLC Securities Distribution as of September 30, 2009 ...........................................21
Table 32. Maiden Lane III LLC Outstanding Principal Balance of Senior Loan and Equity Contribution ..........22
Table 33. Maiden Lane III LLC Summary of Portfolio Composition, Cash and Cash Equivalents,
and Other Assets and Liabilities .........................................................................................................22
Table 34. Maiden Lane III LLC Securities Distribution by Sector, Vintage, and Rating ..................................22
Figure 5. Maiden Lane III LLC Securities Distribution as of September 30, 2009 ..........................................22

Federal Reserve Banks’ Financial Tables ...........................................................................................24
Table 35. Federal Reserve Banks’ Combined Statement of Income and Comprehensive Income ......................25
Table 36. SOMA Financial Summary .....................................................................................................26
Table 37. Loan Programs Financial Summary ..........................................................................................26
Table 38. Consolidated Variable Interest Entities Financial Summary ..........................................................27

1

Overview
Recent Developments
• Continued improvements in ﬁnancial market conditions have been accompanied by further declines in
the amount of credit extended through many of the
Federal Reserve’s liquidity programs.
• On January 12, 2010, the Federal Reserve Board
announced preliminary unaudited results indicating
that the Reserve Banks provided for payments of
approximately $46.1 billion of their estimated 2009

net income of $52.1 billion to the U.S. Treasury.
These payments represent an increase of $14.4 billion over the payments made in 2008, primarily due
to increased earnings on securities holdings during
2009. The Reserve Banks’ securities holdings and
other assets expanded signiﬁcantly during 2009 as a
result of the Federal Reserve’s response to the severe
economic downturn.
• On December 28, 2009, the Federal Reserve Board
proposed amendments to Regulation D (Reserve

Table 1. Assets, Liabilities, and Capital of the Federal Reserve System
Billions of dollars
Item

Current
December 30, 2009

Change from
November 25, 2009

Change from
December 31, 2008

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected assets
Securities held outright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Treasury securities1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal agency debt securities1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Memo: Term Securities Lending Facility3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Memo: Overnight securities lending3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Memo: Net commitments to purchase mortgage-backed securities4 . . . . .

2,238

28

−4

1,845
777
160
908
0
15
155

61
+*
5
56
0
8
9

1,349
301
140
908
−172
6
155

Lending to depository and other ﬁnancial institutions . . . . . . . . . . . . . . . . . . . . . .
Primary, secondary, and seasonal credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term auction credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Primary dealer and other broker-dealer credit . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset-Backed Commercial Paper Money Market Mutual Fund
Liquidity Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

96
20
76
0

−25
+*
−25
0

−509
−74
−374
−37

0

0

−24

Central bank liquidity swaps5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

−16

−543

Lending through other credit facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net portfolio holdings of Commercial Paper Funding Facility LLC6 . . .
Term Asset-Backed Securities Loan Facility, net . . . . . . . . . . . . . . . . . . . . . . .

62
14
48

2
−1
3

−272
−320
48

Support for speciﬁc institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit extended to American International Group, Inc., net7 . . . . . . . . . . . .
Net portfolio holdings of Maiden Lane LLC8 . . . . . . . . . . . . . . . . . . . . . . . . . .
Net portfolio holdings of Maiden Lane II LLC8 . . . . . . . . . . . . . . . . . . . . . . . .
Net portfolio holdings of Maiden Lane III LLC8 . . . . . . . . . . . . . . . . . . . . . . .
Net portfolio holdings of TALF LLC9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred interests in AIA Aurora LLC and ALICO Holdings LLC10 . . .

87
22
27
16
23
*
25

−23
−23
+*
−*
−*
+*
25

−26
−17
−*
−4
−4
+*
25

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected liabilities
Federal Reserve notes in circulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits of depository institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Treasury, general account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Treasury, supplementary ﬁnancing account . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,185

28

−14

890
1,025
150
5
27

7
−143
137
−10
25

37
165
44
−254
6

Total capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

52

−1

10

Note: Unaudited. Components may not sum to totals because of rounding.
* Less than $500 million.
1. Face value.
2. Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. Current face value, which is the remaining principal balance of the underlying mortgages.
Does not include unsettled transactions.
3. Securities loans under the Term Securities Lending Facility and the overnight facility are off-balance-sheet transactions. These loans are shown here
as a memo item to indicate the portion of securities held outright that have been lent through these programs.
4. Current face value. These generally settle within 180 days and include commitments associated with outright transactions as well as dollar rolls.
5. Dollar value of the foreign currency held under these agreements valued at the exchange rate to be used when the foreign currency is returned to the
foreign central bank.
6. Includes commercial paper holdings, net, and about $5 billion in other investments.
7. Excludes credit extended to Maiden Lane II and III LLCs.
8. Fair value, reﬂecting values as of September 30, 2009. Fair value reﬂects an estimate of the price that would be received upon selling an asset if the
transaction were to be conducted in an orderly market on the measurement date. Fair values are updated quarterly.
9. As of December 30, 2009, TALF LLC had purchased no assets from the FRBNY.
10. Book value.

2

Credit and Liquidity Programs and the Balance Sheet

Figure 1. Credit and Liquidity Programs and the Federal Reserve’s Balance Sheet

January 2010

Requirements of Depository Institutions) that would
enable the establishment of a term deposit facility.
Under the proposal, Federal Reserve Banks would
offer interest-bearing term deposits to eligible institutions through an auction mechanism. Term deposits
are one of several tools the Federal Reserve could
employ to drain reserves in order to support the
effective implementation of monetary policy. This
proposal is one component of a process of prudent
planning on the part of the Federal Reserve and has
no implications for monetary policy decisions in the
near term.
• The Federal Reserve Bank of New York (FRBNY)
on January, 11, 2010, published a revised policy
regarding the administration of its relationships with
primary dealers intended to provide greater transparency about the signiﬁcant business standards
expected of primary dealers and to offer clearer
guidance on the process to become a primary dealer.
Substantive changes from the previous policy
include: a more structured presentation of the business standards expected of a primary dealer; a more

3

formal application process for prospective primary
dealers; an increase in the minimum net capital
requirement, from $50 million to $150 million; a
seasoning requirement of one year of relevant operations before a prospective dealer may submit an
application; and a clear notice of actions the FRBNY
may take against a noncompliant primary dealer.
• On December 23, 2009, the Treasury, the Federal
Reserve, and the Federal Deposit Insurance Corporation (FDIC) agreed to terminate the January 15,
2009, Master Agreement with Citigroup under which
the government parties had agreed to provide certain
loss protections and liquidity supports to Citigroup
with respect to a designated pool of $301 billion of
assets. In consideration for terminating the Master
Agreement, the FRBNY received a $50 million termination fee from Citigroup.
• The Treasury reduced balances held in the Supplementary Financing Account at the Federal Reserve
from $15 billion to $5 billion in order to preserve its
ﬂexibility in the conduct of debt-management policy.

4

Credit and Liquidity Programs and the Balance Sheet

System Open Market Account and Liquidity Arrangements with
Foreign Central Banks
System Open Market Account (SOMA)

Table 2. System Open Market Account (SOMA)
Securities Holdings

Recent Developments

Billions of dollars, as of December 30, 2009

• The SOMA portfolio has continued to expand,
although the pace of Federal Reserve purchases of
securities under the large-scale asset purchase programs (LSAPs) has slowed compared to its pace last
year.
• As of December 30, 2009, the Federal Reserve held
about $160 billion in agency debt and $908 billion
in agency-guaranteed mortgage-backed securities
(MBS) under the Federal Open Market Committee’s
(FOMC’s) LSAPs.

Background
Open market operations (OMOs)—the purchase and
sale of securities in the open market by a central
bank—are a key tool used by the Federal Reserve in
the implementation of monetary policy. Historically,
the Federal Reserve has used OMOs to adjust the supply of reserve balances so as to keep the federal funds
rate around the target federal funds rate established by
the FOMC. OMOs are conducted by the Trading Desk
at the FRBNY, which acts as agent for the FOMC. The
range of securities that the Federal Reserve is authorized to purchase and sell is relatively limited. The
authority to conduct OMOs is granted under Section
14 of the Federal Reserve Act.
OMOs can be divided into two types: permanent
and temporary. Permanent OMOs are outright purchases or sales of securities for the SOMA, the Federal
Reserve’s portfolio. Permanent OMOs have traditionally been used to accommodate the longer-term factors
driving the expansion of the Federal Reserve’s balance
sheet, principally the trend growth of currency in circulation. More recently, the expansion of SOMA securities holdings has been driven by LSAPs. The composition of the SOMA is shown in table 2. Temporary
OMOs typically are used to address reserve needs that
are deemed to be transitory in nature. These operations
are either repurchase agreements (repos) or reverse
repurchase agreements (reverse repos). Under a repo,
the Trading Desk buys a security under an agreement
to resell that security in the future; under a reverse
repo, the Trading Desk sells a security under an agreement to repurchase that security in the future. A repo is

Security type

Total par value

U.S. Treasury bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Treasury notes and bonds, nominal . . . . . . . . . . . . . .
U.S. Treasury notes and bonds, inﬂation-indexed1 . . . . .
Federal agency debt securities2 . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities3 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total SOMA securities holdings . . . . . . . . . . . . . . . . . . . . .

18
708
51
160
908
1,845

Note: Unaudited. Components may not sum to total because of
rounding. Does not include investments denominated in foreign
currencies or unsettled transactions.
1. Includes inﬂation compensation.
2. Direct obligations of Fannie Mae, Freddie Mac, and the Federal
Home Loan Banks.
3. Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. Current
face value of the securities, which is the remaining principal balance of
the underlying mortgages.

the economic equivalent of a collateralized loan; conversely, a reverse repo is the economic equivalent of
collateralized borrowing. In both types of transactions,
the difference between the purchase and sale prices
reﬂects the interest on the loan or borrowing.
Each OMO affects the Federal Reserve’s balance
sheet; the size and nature of the effect depend on the
speciﬁcs of the operation. The Federal Reserve publishes its balance sheet each week in the H.4.1 statistical release, “Factors Affecting Reserve Balances of
Depository Institutions and Consolidated Statement of
Condition of Reserve Banks” (www.federalreserve.gov/
releases/h41). The release separately reports securities
held outright, repos, and reverse repos.
The Federal Reserve’s approach to the implementation of monetary policy has evolved considerably since
2007, and particularly since late 2008. The FOMC has
established a near-zero target range for the federal
funds rate, implying that the very large volume of
reserve balances provided through the various liquidity
facilities is consistent with the FOMC’s funds rate
objectives. In addition, OMOs have provided increasing amounts of reserve balances.
To help reduce the cost and increase the availability
of credit for the purchase of houses, on November 25,
2008, the Federal Reserve announced that it would buy
direct obligations of Fannie Mae, Freddie Mac, and the
Federal Home Loan Banks, and MBS guaranteed by
Fannie Mae, Freddie Mac, and Ginnie Mae. The
FOMC authorized purchases of up to $1.25 trillion of
agency MBS and up to $200 billion of agency direct

5

January 2010

obligations. Subsequently, in November 2009, the
FOMC announced that agency debt purchases would
be about $175 billion. This amount, while somewhat
less than the previously announced maximum of
$200 billion, was consistent with the path of purchases
and reﬂected the limited availability of agency debt.
The Federal Reserve determined that supporting the
MBS “dollar roll” market promotes the goals of the
MBS purchase program. Dollar roll transactions, which
consist of a purchase of securities combined with an
agreement to sell securities in the future, provide shortterm ﬁnancing to the MBS market. Because of principal and interest payments and occasional delays in the
settlement of transactions, the Federal Reserve also
holds some cash associated with the MBS purchase
program.
The FRBNY announced in August 2009 that it
would streamline the set of external investment managers for the agency-guaranteed MBS purchase program,
reducing the number of investment managers from four
to two. The FRBNY announced in November 2009
that it would begin to use its own staff rather than
external investment managers on select days to execute
LSAP agency MBS purchases. These changes were not
performance-related: the FRBNY had anticipated that it
would adjust its use of external investment managers
as it gained more experience with the program.
In September 2009, the Federal Reserve began to
purchase on-the-run agency securities—the most
recently issued securities—in order to mitigate market
dislocations and promote overall market functioning.
Prior to this change, purchases were focused on offthe-run agency securities.
On September 23, 2009, the FOMC announced its
intention to gradually slow the pace of its purchases of
agency-guaranteed MBS and agency debt. In implementing this directive, the Trading Desk of the
FRBNY announced that it would scale back the average weekly purchase amounts of agency MBS and
reduce the size and frequency of agency debt purchases. The FOMC anticipates that these transactions
will be executed by the end of the ﬁrst quarter of
2010. The Federal Reserve’s outright holdings of MBS
are reported weekly in tables 1, 3, 10, and 11 of the
H.4.1 statistical release. In addition, detailed data on
all settled agency MBS holdings are published weekly
on the FRBNY website (www.newyorkfed.org/markets/
soma/sysopen_accholdings.html).
In March 2009, the FOMC announced that it would
also purchase up to $300 billion of longer-term Treasury securities to help improve conditions in private
credit markets. The Federal Reserve has purchased a
range of securities across the maturity spectrum,

including Treasury Inﬂation-Protected Securities
(TIPS). The bulk of purchases have been in intermediate maturities. In August 2009, the FOMC announced
that it decided to gradually slow the pace of these
transactions in order to promote a smooth transition in
markets as purchases of these Treasury securities are
completed. The FOMC anticipated that the purchases
would be completed by the end of October; the purchases were completed as planned.
In December 2009, the FRBNY conducted a set of
small-scale, real-value, triparty reverse repurchase
transactions with primary dealers. Reverse repurchase
agreements are a tool that could be used to support a
reduction in monetary accommodation at the appropriate time. These transactions were conducted to ensure
operational readiness at the Federal Reserve, the major
clearing banks, and the primary dealers, and had no
material impact on the availability of reserves or on
market rates.

Liquidity Swaps
Recent Developments
• Use of the Federal Reserve’s foreign central bank
dollar liquidity swaps has continued to decline.
• As shown in table 3, as of December 30, 2009, total
dollar liquidity extended to foreign central banks had
dropped to $10 billion.
• The Federal Reserve is working with its central bank
counterparties to close its temporary liquidity swap
arrangements by February 1, 2010.

Table 3. Amounts Outstanding under Dollar Liquidity
Swaps
Billions of dollars
Central bank

Amount
as of
12/30/2009

Amount
as of
12/31/2008

Bank of Canada . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banco de Mexico . . . . . . . . . . . . . . . . . . . . . . . . . .
European Central Bank . . . . . . . . . . . . . . . . . . . .
Swiss National Bank . . . . . . . . . . . . . . . . . . . . . . .
Bank of Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank of England . . . . . . . . . . . . . . . . . . . . . . . . . . .
Danmarks Nationalbank . . . . . . . . . . . . . . . . . . .
Reserve Bank of Australia . . . . . . . . . . . . . . . . .
Sveriges Riksbank . . . . . . . . . . . . . . . . . . . . . . . . .
Norges Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve Bank of New Zealand . . . . . . . . . . . .
Bank of Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banco Central do Brasil . . . . . . . . . . . . . . . . . . .
Monetary Authority of Singapore . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0
3
7
0
1
0
0
0
0
0
0
0
0
0
10

0
0
291
25
123
33
15
23
25
8
0
10
0
0
554

Note: Unaudited. Components may not sum to totals because of
rounding.

6

Background
Because of the global character of bank funding markets, the Federal Reserve has worked with other central banks in providing liquidity to ﬁnancial markets
and institutions. As part of these efforts, the FRBNY
entered into agreements to establish temporary reciprocal currency arrangements (central bank liquidity swap
lines) with a number of foreign central banks. Two
types of temporary swap lines have been established—
dollar liquidity lines and foreign currency liquidity
lines.
The FRBNY operates the swap lines under the
authority granted under Section 14 of the Federal
Reserve Act and in compliance with authorizations,
policies, and procedures established by the FOMC. On
December 16, 2009, the Federal Reserve announced
that it will be working with its central bank counterparties to close its temporary liquidity swap arrangements by February 1, 2010.

Dollar Liquidity Swaps
On December 12, 2007, the FOMC announced that it
had authorized dollar liquidity swap lines with the
European Central Bank and the Swiss National Bank
to provide liquidity in U.S. dollars to overseas markets.
Subsequently, the FOMC authorized dollar liquidity
swap lines with additional central banks. The FOMC
has authorized through February 1, 2010, the arrangements between the Federal Reserve and each of the
following central banks: the Reserve Bank of Australia,
the Banco Central do Brasil, the Bank of Canada, the
Bank of Japan, Danmarks Nationalbank, the Bank of
England, the European Central Bank, the Bank of
Korea, the Banco de Mexico, the Reserve Bank of
New Zealand, Norges Bank, the Monetary Authority of
Singapore, Sveriges Riksbank, and the Swiss National
Bank.
Swaps under these lines consist of two transactions.
When a foreign central bank (FCB) draws on its swap
line with the FRBNY, the FCB sells a speciﬁed
amount of its currency to the FRBNY in exchange for
dollars at the prevailing market exchange rate. The
FRBNY holds the foreign currency in an account at
the FCB. The dollars that the FRBNY provides are
deposited in an account that the FCB maintains at the
FRBNY. At the same time, the FRBNY and the FCB
enter into a binding agreement for a second transaction
that obligates the FCB to buy back its currency on a

Credit and Liquidity Programs and the Balance Sheet

speciﬁed future date at the same exchange rate. The
second transaction unwinds the ﬁrst. Because the swap
transaction will be unwound at the same exchange rate
used in the initial transaction, the recorded value of the
foreign currency amounts is not affected by changes in
the market exchange rate. At the conclusion of the second transaction, the FCB compensates the FRBNY at a
market-based rate.
When the FCB lends the dollars it obtained by
drawing on its swap line to institutions in its jurisdiction, the dollars are transferred from the FCB account
at the FRBNY to the account of the bank that the borrowing institution uses to clear its dollar transactions.
The FCB remains obligated to return the dollars to the
FRBNY under the terms of the agreement, and the
FRBNY is not a counterparty to the loan extended by
the FCB. The FCB bears the credit risk associated with
the loans it makes to institutions in its jurisdiction.
The foreign currency that the Federal Reserve
acquires is an asset on the Federal Reserve’s balance
sheet. In tables 1, 10, and 11 of the weekly H.4.1 statistical release, the dollar value of amounts that the
foreign central banks have drawn but not yet repaid is
reported in the line entitled “Central bank liquidity
swaps.” Dollar liquidity swaps have maturities ranging
from overnight to three months. Table 2 of the H.4.1
statistical release reports the maturity distribution of
the outstanding dollar liquidity swaps.

Foreign Currency Liquidity Swap Lines
On April 6, 2009, the FOMC announced foreigncurrency liquidity swap lines with the Bank of
England, the European Central Bank, the Bank of
Japan, and the Swiss National Bank. These lines are
designed to provide the Federal Reserve with the
capacity to offer liquidity to U.S. institutions in foreign
currency should a need arise. These lines mirror the
existing dollar liquidity swap lines, which provide
FCBs with the capacity to offer U.S. dollar liquidity to
ﬁnancial institutions in their jurisdictions. If drawn
upon, the foreign-currency swap lines would support
operations by the Federal Reserve to address ﬁnancial
strains by providing liquidity to U.S. institutions in
amounts of up to £30 billion (sterling), €80 billion
(euro), ¥10 trillion (yen), and CHF 40 billion (Swiss
francs). So far, the Federal Reserve has not drawn on
these swap lines; it anticipates that they will be discontinued on February 1, 2010.

7

January 2010

Lending Facilities to Support Overall Market Liquidity
Lending to Depository Institutions

Table 5. Concentration of Discount Window Credit
Outstanding to Depository Institutions

Recent Developments

For four weeks ending December 30, 2009

• Credit provided to depository institutions through the
discount window and the Term Auction Facility
(TAF) has continued to decline, primarily reﬂecting
reductions in loans outstanding under the TAF.
• TAF auctions have been undersubscribed since the
October 5, 2008, auction. Since then, the auction rate
has been equal to the minimum bid rate, which has
been 25 basis points since the January 12, 2009, auction.
• As of the January 11, 2010, TAF auction, the transition to a single 28-day auction cycle was completed.
The Federal Reserve expects that amounts provided
under the TAF will be scaled back over 2010.
• As indicated in table 6, total collateral pledged by
depository institutions with discount window loans
outstanding on December 30, 2009, was $286 billion, about three times the amount of credit
outstanding.

Background
The discount window helps to relieve liquidity strains
for individual depository institutions and for the banking system as a whole by providing a source of funding in times of need. Much of the statutory framework
that governs lending to depository institutions is contained in Section 10B of the Federal Reserve Act, as
Table 4. Discount Window Credit Outstanding to
Depository Institutions
Daily average borrowing for each class of borrower over four weeks
ending December 30, 2009
Type and size of borrower
Commercial banks3
Assets: more than $50 billion . . . . . . . . . . .
Assets: $5 billion to $50 billion . . . . . . . .
Assets: $250 million to $5 billion . . . . . .
Assets: less than $250 million . . . . . . . . . .
Thrift institutions and credit unions . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Average
number of
borrowers1

Average
borrowing
($ billions)2

9
33
99
69
35
245

30
60
10
*
4
105

Note: Unaudited. Includes primary, secondary, seasonal, and TAF
credit. Size categories based on total domestic assets from Call Report
data as of September 30, 2009. Components may not sum to totals
because of rounding.
* Less than $500 million.
1. Average daily number of depository institutions with credit
outstanding. Over this period, a total of 504 institutions borrowed.
2. Average daily borrowing by all depositories in each category.
3. Includes branches and agencies of foreign banks.

Rank by amount of borrowing

Number of
borrowers

Daily average
borrowing
($ billions)

Top ﬁve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Next ﬁve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5
5
235
245

42
18
45
105

Note: Unaudited. Amount of primary, secondary, seasonal, and TAF
credit extended to the top ﬁve and next ﬁve borrowers on each day, as
ranked by daily average borrowing. Components may not sum to totals
because of rounding.

amended. The general policies that govern discount
window lending are set forth in the Federal Reserve
Board’s Regulation A.
Depository institutions have, since 2003, had access
to three types of discount window credit—primary
credit, secondary credit, and seasonal credit. Primary
credit is available to depository institutions in generally sound ﬁnancial condition with few administrative
requirements. Secondary credit may be provided to
depository institutions that do not qualify for primary
credit, subject to review by the lending Reserve Bank.
Seasonal credit provides short-term funds to smaller
depository institutions that experience regular seasonal
swings in loans and deposits.
On August 17, 2007, in order to promote orderly
market functioning, the Federal Reserve began to allow
the provision of primary credit for terms as long as 30
days. On March 16, 2008, the Federal Reserve
increased the maximum maturity of primary credit
loans to 90 days. On November 17, 2009, in response
to the improvement in ﬁnancial conditions, the Federal
Reserve announced that the maximum maturity on primary credit loans would be reduced to 28 days effective January 14, 2010.
In December 2007, the Federal Reserve introduced
the TAF, which provides credit through an auction
mechanism to depository institutions in generally
sound ﬁnancial condition. All regular discount window
loans and TAF loans must be fully collateralized to the
satisfaction of the lending Reserve Bank, with an
appropriate “haircut” applied to the value of the
collateral.
On September 24, 2009, the Federal Reserve
announced that the TAF would be scaled back in
response to continued improvements in ﬁnancial market conditions. The offering amount under the 28-day

8

Credit and Liquidity Programs and the Balance Sheet

auction will remain unchanged from its September
level of $75 billion through January 2010. The auction
amount for the 84-day auctions was reduced to
$50 billion in October and to $25 billion in November.
In addition, the maturity dates of the 84-day auctions
were adjusted over time to align with the maturity
dates of the 28-day auctions. As of the January 11,
2010, auction, all TAF auctions are on a 28-day cycle.
In extending credit to depository institutions, the
Federal Reserve closely monitors the ﬁnancial condition of borrowers. Monitoring the ﬁnancial condition
of depository institutions is a four-step process
designed to minimize the risk of loss to the Federal
Reserve posed by weak or failing depository institutions. The ﬁrst step is monitoring, on an ongoing basis,
the safety and soundness of all depository institutions
that access or may access the discount window and the
payment services provided by the Federal Reserve. The
second step is identifying institutions whose condition,
characteristics, or affiliation would present higher-thanacceptable risk to the Federal Reserve in the absence
of controls on their access to Federal Reserve lending
facilities and other Federal Reserve services. The third
step is communicating—to staff within the Federal
Reserve System and to other supervisory agencies, if
and when necessary—relevant information about those
institutions identiﬁed as posing higher risk. The fourth
step is implementing appropriate measures to mitigate
the risks posed by such entities.
At the heart of the condition monitoring process is
an internal rating system that provides a framework for
identifying institutions that may pose undue risks to
the Federal Reserve. The rating system relies mostly
on information from each institution’s primary superviTable 6. Lendable Value of Collateral Pledged by
Borrowing Depository Institutions
Billions of dollars, as of December 30, 2009
Type of collateral
Loans
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities
U.S. Treasury/agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Municipal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate market instruments . . . . . . . . . . . . . . . . . . . . . . .
MBS/CMO: agency-guaranteed . . . . . . . . . . . . . . . . . . . . .
MBS/CMO: other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International (sovereign, agency, municipal, and
corporate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Lendable value
63
3
15
18
5
17
19
22
12
77
37
286

Note: Unaudited. Collateral pledged by borrowers of primary,
secondary, seasonal, and TAF credit as of the date shown. Total primary,
secondary, seasonal, and TAF credit on this date was $96 billion. The
lendable value of collateral pledged by all depository institutions,
including those without any outstanding loans, was $1,231 billion.
Lendable value is value after application of appropriate haircuts.
Components may not sum to total because of rounding.

Table 7. Lendable Value of Securities Pledged by
Depository Institutions by Rating
Billions of dollars, as of December 30, 2009
Type of security and rating

Lendable value

U.S. Treasury, agency, and agency-guaranteed securities .
Other securities
AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aa/AA1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Baa/BBB3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investment-grade4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

155
183
44
50
21
52
504

Note: Unaudited. Lendable value for all institutions that have pledged
collateral, including those that were not borrowing on the date shown.
Lendable value is value after application of appropriate haircuts.
Components may not sum to total because of rounding.
1. Includes short-term securities with A-1+ or F1+ rating or MIG 1 or
SP-1+ municipal bond rating.
2. Includes short-term securities with A-1 rating or SP-1 municipal
bond rating.
3. Includes short-term securities with A-2, P-2, A-3, or P-3 rating.
4. Determined based on a credit review by a Reserve Bank.

sor, including CAMELS ratings, to identify potentially
problematic institutions and classify them according to
the severity of the risk they pose to the Federal
Reserve.1 Having identiﬁed institutions that pose a
higher risk, the Federal Reserve then puts in place a
standard set of risk controls that become increasingly
stringent as the risk posed by an institution grows;
individual Reserve Banks may implement additional
risk controls to further mitigate risk if they deem it
necessary.

Collateral
All extensions of discount window credit by the Federal Reserve must be secured to the satisfaction of the
lending Reserve Bank by “acceptable collateral.”
Assets accepted as collateral are assigned a lendable
value deemed appropriate by the Reserve Bank; lendable value is determined as the market price of the
asset, less a haircut. When a market price is not available, a haircut may be applied to the outstanding balance or a valuation based on an asset’s cash ﬂow.
Haircuts reﬂect credit risk and, for traded assets, the
historical volatility of the asset’s price and the liquidity
of the market in which the asset is traded; the Federal
Reserve’s haircuts are generally in line with typical
market practice. The Federal Reserve applies larger
haircuts, and thus assigns lower lendable values, to
assets for which no market price is available relative to
comparable assets for which a market price is available. A borrower may be required to pledge additional
collateral if its ﬁnancial condition weakens. Collateral
1. CAMELS is a rating system employed by banking regulators to
assess the soundness of depository institutions. CAMELS is an acronym that stands for Capital, Assets, Management, Earnings, Liquidity, and Sensitivity.

9

January 2010

is pledged under the terms and conditions speciﬁed in
the Federal Reserve Banks’ standard lending agreement, Operating Circular No. 10 (www.frbservices.org/
ﬁles/regulations/pdf/operating_circular_10.pdf).

Lending to Primary Dealers

Discount window loans and extensions of credit
through the TAF are made with recourse to the borrower beyond the pledged collateral. Nonetheless, collateral plays an important role in mitigating the credit
risk associated with these extensions of credit. The
Federal Reserve generally accepts as collateral for discount window loans and TAF credit any assets that
meet regulatory standards for sound asset quality. This
category of assets includes most performing loans and
most investment-grade securities, although for some
types of securities (including commercial mortgagebacked securities, collateralized debt obligations, collateralized loan obligations, and certain non-dollardenominated foreign securities) only AAA-rated
securities are accepted. An institution may not pledge
as collateral any instruments that the institution or its
affiliates have issued. Additional collateral is required
for discount window and TAF loans with remaining
maturity of more than 28 days—for these loans, borrowing only up to 75 percent of available collateral is
permitted. To ensure that they can borrow from the
Federal Reserve should the need arise, many depository institutions that do not have an outstanding discount window or TAF loan nevertheless routinely
pledge collateral.
Changes to the lending margins on discount window
collateral took effect on October 19, 2009. The Federal
Reserve periodically reviews its collateral valuation
practices, and the new collateral margins reﬂect the
results of a broad-based review, which began before
the current ﬁnancial crisis, of methodology and data
sources. For more information on these changes to collateral margins, refer to the Discount Window and Payments System Risk public website (www.frbdiscountwindow.org).
As shown in table 8, most depository institutions
that borrow from the Federal Reserve maintain collateral well in excess of their current borrowing levels.

• There has been no borrowing at the Primary Dealer
Credit Facility (PDCF) since mid-May 2009. As previously announced, the Federal Reserve anticipates
that the PDCF will expire on February 1, 2010.
• Since mid-August, borrowing from the Term Securities Lending Facility (TSLF) has remained
unchanged at zero. The January 7, 2010, TSLF
Schedule 2 auction was the last auction scheduled
prior to the anticipated expiration of the TSLF on
February 1, 2010.

Table 8. Discount Window Credit Outstanding to
Borrowing Depository Institutions—Percent of Collateral
Used

Recent Developments

Background
On March 16, 2008, the Federal Reserve announced
the creation of the PDCF, which is an overnight loan
facility that provides funding to primary dealers and
helps foster improved conditions in ﬁnancial markets
more generally. PDCF credit is fully secured by collateral with appropriate haircuts—that is, the value of the
collateral exceeds the value of the loan extended. Initially, eligible collateral was restricted to investmentgrade securities. On September 14, 2008, however, the
set of eligible collateral was broadened to closely
match the types of instruments that can be pledged in
the tri-party repurchase agreement systems of the two
major clearing banks. On September 21, 2008, and
November 23, 2008, the Federal Reserve Board authorized the extension of credit to a set of other securities
dealers on terms very similar to the PDCF. Credit
extended under either program is reported weekly in
table 1 of the H.4.1 statistical release as “Primary
dealer and other broker-dealer credit” and is included
in “Other loans” in tables 10 and 11 of the H.4.1 statistical release.
On March 11, 2008, the Federal Reserve announced
the creation of the TSLF. Under the TSLF, the Federal
Reserve Bank of New York (FRBNY) lends Treasury
securities to primary dealers for 28 days against eligible collateral in two types of auctions. For so-called
“Schedule 1” auctions, the eligible collateral consists
of Treasury securities, agency securities, and agency-

As of December 30, 2009
Percent of collateral used

Number of
borrowers

Total
borrowing
($ billions)

Over 0 and under 25 . . . . . . . . . . . . . . . . . . . . . . .
25 to 50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50 to 75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
75 to 90 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over 90 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

83
75
58
28
19
263

17
33
27
16
2
96

Note: Unaudited. Components may not sum to totals because of
rounding.

Table 9. Credit Outstanding to Primary Dealers
As of December 30, 2009
Number of borrowers

Borrowing under
PDCF
($ billions)

Borrowing under
TSLF
($ billions)

0

0

0

Note: Unaudited. Borrowing ﬁgures represent total amounts of PDCF
and TSLF credit extended as of the date shown. The total reported for
the TSLF represents the par value of securities lent.

10

Credit and Liquidity Programs and the Balance Sheet

Table 10. Concentration of Borrowing at the PDCF and
TSLF

Table 11. PDCF Collateral by Type
Billions of dollars, as of December 30, 2009

As of December 30, 2009
Type of collateral
Rank by amount of borrowing

Number of
borrowers

Daily average
borrowing
($ billions)

Top ﬁve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Next ﬁve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0
0
0
0

0
0
0
0

Note: Unaudited.

guaranteed mortgage-backed securities (MBS). For
“Schedule 2” auctions, the eligible collateral includes
Schedule 1 collateral plus highly rated private securities. In mid-2008, the Federal Reserve introduced the
Term Securities Lending Facility Options Program
(TOP), which offers options to primary dealers to draw
upon short-term, ﬁxed-rate TSLF loans from the System Open Market Account (SOMA) portfolio in
exchange for program-eligible collateral. The TOP is
intended to enhance the effectiveness of the TSLF by
offering added liquidity over periods of heightened
collateral market pressures, such as quarter-end dates.
The Federal Reserve Board has authorized the
extension of credit from the TSLF through February 1,
2010. TSLF Schedule 1 and TOP auctions, however,
were suspended effective July 2009 in light of considerably lower use of the facility. Furthermore, in September the Federal Reserve announced its intention to
scale back the size of TSLF auctions held between
October 2009 and January 2010. The size of TSLF
auctions was reduced to $50 billion in October and
$25 billion in November; offering amounts remained at
$25 billion in December and January. On December
16, 2009, the Federal Reserve announced that it anticipates that the TSLF and PDCF will expire on February
1, 2010, consistent with the Federal Reserve’s
announcement of June 25, 2009.
The TSLF supports the liquidity of primary dealers
and fosters improved conditions in ﬁnancial markets
more generally. Securities lent through these programs
are reported weekly in table 1A of the H.4.1 statistical
release.
In addition to the TSLF and TOP, the Federal
Reserve has long operated an overnight securities lending facility as a vehicle to address market pressures for
speciﬁc Treasury securities. Since July 9, 2009, this
facility has lent housing-related government-sponsored
enterprise (GSE) securities that are particularly sought
after. Amounts outstanding under that program are,
generally, fairly modest, and are also reported in table
1A of the H.4.1 statistical release.

Lendable value

Securities
U.S. Treasury/agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Municipal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate market instruments . . . . . . . . . . . . . . . . . . . . . . .
MBS/CMO: agency-guaranteed . . . . . . . . . . . . . . . . . . . . .
MBS/CMO: other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International (sovereign, agency, and corporate) . . . .
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0
0
0
0
0
0
0
0
0
0
0

Note: Unaudited. Collateral pledged by borrowers of PDCF and
related credit to primary dealers as of the date shown. Borrowing on that
date was zero. Lendable value is value after application of appropriate
haircuts.

Collateral
Eligible collateral for loans extended through the
PDCF includes all assets eligible for tri-party repurchase agreement arrangements through the major clearing banks as of September 12, 2008. The amount of
PDCF credit extended to any dealer may not exceed
the lendable value of eligible collateral that the dealer
has provided to the FRBNY. The collateral is valued
by the clearing banks; values are based on prices
reported by a number of private-sector pricing services
widely used by market participants. Loans extended
under the PDCF are made with recourse beyond the
collateral to the primary dealer entity itself. Breakdowns of PDCF collateral by asset type and credit rating are shown in tables 11 and 12, respectively.
Transactions under the TSLF involve lending securities rather than cash: a dealer borrows Treasury securities from the Federal Reserve and provides another
security as collateral. Eligible collateral is determined
by the Federal Reserve. Currently, two schedules of
collateral are deﬁned. Schedule 1 collateral is Treasury,
agency, and agency-guaranteed MBS. Schedule 2 collateral is investment-grade corporate, municipal,
Table 12. PDCF Collateral by Rating
Billions of dollars, as of December 30, 2009
Type of collateral

Lendable value

U.S. Treasury/agency securities . . . . . . . . . . . . . . . . . . . . . . .
Other securities
Aaa/AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aa/AA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A ...................................................
Baa/BBB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ba/BB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B/B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Caa/CCC or below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrated securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0
0
0
0
0
0
0
0
0
0
0

Note: Unaudited. Collateral pledged by borrowers of PDCF and related
credit to primary dealers as of the date shown. Borrowing on that date
was zero. Lendable value is value after application of appropriate
haircuts.

11

January 2010
Table 13. TSLF Collateral by Type

Table 15. Concentration of CPFF Issuers

Billions of dollars, as of December 30, 2009

For four weeks ending December 30, 2009

Type of collateral
Securities
U.S. Treasury/agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Municipal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MBS/CMO: agency-guaranteed . . . . . . . . . . . . . . . . . . . . .
MBS/CMO: other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rank by amount of commercial paper

Number of
borrowers

Daily average
borrowing
($ billions)

Top ﬁve issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5
3
8

9
1
10

Lendable value
0
0
0
0
0
0
0

Note: Unaudited. Amount of commercial paper held in the CPFF that
was issued by the top ﬁve and other issuers on each day. Components
may not sum to totals because of rounding.

Note: Unaudited. Collateral pledged by borrowers of TSLF as of the
date shown. Borrowing on that date was zero. Lendable value is value
after application of appropriate haircuts.

Table 16. CPFF Commercial Paper Holdings by Type
Billions of dollars, as of December 30, 2009
Type of commercial paper

Table 14. TSLF Collateral by Rating
Billions of dollars, as of December 30, 2009
Type of collateral

Lendable value

U.S. Treasury, agency, and agency-guaranteed securities .
Other securities
Aaa/AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aa/AA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A/A-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Baa/BBB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0
0
0
0
0
0

Note: Unaudited. Collateral pledged by borrowers of TSLF as of the
date shown. Borrowing on that date was zero. Lendable value is value
after application of appropriate haircuts.

Value

Unsecured commercial paper
Issued by ﬁnancial ﬁrms . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued by nonﬁnancial ﬁrms . . . . . . . . . . . . . . . . . . . . . . . .
Asset-backed commercial paper . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2
0
7
9

Note: Unaudited. Components may not sum to total because of
rounding; does not include $5 billion of other investments.

Table 17. CPFF Commercial Paper Holdings by Rating
Billions of dollars, as of December 30, 2009
Type of collateral

Value

1

mortgage-backed, and asset-backed securities, as well
as Schedule 1 collateral. Haircuts on posted collateral
are determined by the FRBNY using methods consistent with current market practices. Breakdowns of
TSLF collateral by asset type and credit rating are
shown in tables 13 and 14, respectively.

Commercial Paper Funding Facility (CPFF)
Recent Developments
• The amount of commercial paper held by the CPFF
has continued to decline in recent weeks. Improvements in market conditions have allowed some borrowers to obtain ﬁnancing from private investors.
This factor, combined with reduced funding needs,
has contributed to the decreased usage of the facility.
• As previously announced, the Federal Reserve anticipates that the CPFF will expire on February 1, 2010.

Background
The CPFF is a facility, authorized under Section 13(3)
of the Federal Reserve Act, which supports liquidity in
the commercial paper markets. The CPFF provides a
liquidity backstop to U.S. issuers of commercial paper
through a specially created limited liability company
(LLC) called the CPFF LLC. This LLC purchases
three-month unsecured and asset-backed commercial
paper directly from eligible issuers. The FRBNY pro-

Commercial paper with rating
A-1/P-1/F1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Split-rated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Downgraded after purchase . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9
0
0
9

Note: Unaudited. Components may not sum to total because of rounding;
does not include $5 billion of other investments.
1. The CPFF purchases only U.S. dollar-denominated commercial
paper (including asset-backed commercial paper) that is rated at least
A-1/P-1/F1 by Moody’s, S&P, or Fitch and, if rated by more than one of
these rating organizations, is rated at least A-1/P-1/F1 by two or more.
“Split-rated” is acceptable commercial paper that has received an A-1/
P-1/F1 rating from two rating organizations and a lower rating from a
third rating organization. When pledged commercial paper is downgraded
below split-rated after purchase, the facility holds such paper to maturity.

vides ﬁnancing to the LLC, and the FRBNY’s loan to
the LLC is secured by all of the assets of the LLC,
including those purchased with the accumulated
upfront fees paid by the issuers. Breakdowns of commercial paper held in the CPFF LLC, by type and
credit rating, are shown in tables 16 and 17,
respectively.
The CPFF was announced on October 7, 2008, and
purchases of commercial paper began on October 27.
This program is administered by the FRBNY, and the
assets and liabilities of the LLC are consolidated onto
the balance sheet of the FRBNY. The net assets of the
LLC are shown in tables 1, 10, and 11 of the weekly
H.4.1 statistical release, and primary accounts of the
LLC are presented in table 7 of the H.4.1 statistical
release. On December 16, 2009, the Federal Reserve
announced that it anticipates that the CPFF will expire
on February 1, 2010, consistent with the Federal
Reserve’s announcement of June 25, 2009.

12

Credit and Liquidity Programs and the Balance Sheet

Asset-Backed Commercial Paper Money
Market Mutual Fund Liquidity Facility
(AMLF)
Recent Developments
• Credit outstanding under the AMLF has been zero
since October 13, 2009. As previously announced,
the Federal Reserve anticipates that the AMLF will
expire on February 1, 2010.

Background
The AMLF is a lending facility that ﬁnances the purchase of high-quality asset-backed commercial paper
from money market mutual funds (MMMFs) by U.S.
depository institutions and bank holding companies.
The program is intended to assist money funds that
hold such paper in meeting the demand for redemptions by investors and to foster liquidity in the assetbacked commercial paper (ABCP) market and money
markets more generally. The loans extended through
the AMLF are non-recourse loans; as a result, the Federal Reserve has rights to only the collateral securing
the loan if the borrower elects not to repay. To help
ensure that the AMLF is used for its intended purpose
of providing a temporary liquidity backstop to
MMMFs, the Federal Reserve has established a
redemption threshold for use of the facility. Under this
requirement, a MMMF must experience material
outﬂows—deﬁned as at least ﬁve percent of net assets
in a single day or at least 10 percent of net assets
within the prior ﬁve business days—before the ABCP
that it sells would be eligible collateral for AMLF
loans to depository institutions and bank holding companies. Any eligible ABCP purchased from a MMMF
that has experienced redemptions at these thresholds
could be pledged to the AMLF at any time within the
ﬁve business days following the date that the threshold
level of redemptions was reached.
The initiation of the AMLF, announced on September 19, 2008, relied on authority under Section 13(3)
of the Federal Reserve Act. It is administered by the
Federal Reserve Bank of Boston, which is authorized
to make AMLF loans to eligible borrowers in all 12
Federal Reserve Districts. Lending through the AMLF
is presented in table 1 of the weekly H.4.1 statistical
release and is included in “Other loans” in tables 10
and 11 of the H.4.1 statistical release.
Table 18. AMLF: Number of Borrowers and Amount
Outstanding
Daily average for four weeks ending December 30, 2009
Number of
borrowers
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note: Unaudited.

Borrowing
($ billions)

0

0

Since May 8, 2009, there has been no new borrowing through the AMLF, and as of October 13, 2009, all
prior outstanding AMLF credit had matured. On
December 16, 2009, the Federal Reserve announced
that it anticipates that the AMLF will expire on February 1, 2010, consistent with the Federal Reserve’s
announcement of June 25, 2009.

Collateral
Collateral eligible for the AMLF is limited to ABCP
that:
— was purchased by the borrower on or after September 19, 2008, from a registered investment
company that holds itself out as a MMMF and
has experienced recent material outﬂows;
— was purchased by the borrower at the mutual
fund’s acquisition cost as adjusted for amortization of premium or accretion of discount on the
ABCP through the date of its purchase by the
borrower;
— was not rated lower than A-1, P-1, or F1 at the
time it was pledged to the Federal Reserve Bank
of Boston (this would exclude paper that is rated
A-1/P-1/F1 but is on watch for downgrade by
any major rating agency);
— was issued by an entity organized under the laws
of the United States or a political subdivision
thereof under a program that was in existence on
September 18, 2008; and
— has a stated maturity that does not exceed 120
days if the borrower is a bank, or 270 days if the
borrower is a non-bank.
The qualifying ABCP must be transferred to the Federal Reserve Bank of Boston’s restricted account at the
Depository Trust Company before an advance, collateralized by that ABCP, will be approved. The collateral
is valued at the amortized cost (as deﬁned in the Letter
of Agreement) of the eligible ABCP pledged to secure
an advance. Advances made under the facility are
made without recourse, provided the requirements in
the Letter of Agreement are met. A breakdown of
AMLF collateral by credit rating is shown in table 19.
Table 19. AMLF Collateral by Rating
Billions of dollars, as of December 30, 2009
Type of collateral

Value

Asset-backed commercial paper with rating
A-1/P-1/F1 and not on watch for downgrade . . . . . . .
A-1/P-1/F1 but on watch for downgrade1 . . . . . . . . . . .
Below A-1/P-1/F1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0
0
0
0

Note: Unaudited. Components may not sum to total because of
rounding.
1. The AMLF accepts only U.S.-dollar denominated asset-backed
commercial paper (ABCP) that is not rated lower than A-1, P-1, or F1 by
Moody’s, S&P, or Fitch, and (effective April 22, 2009) is not on watch
for downgrade. Collateral that is on watch for downgrade or is rated
below A-1/P-1/F1 is ABCP that has deteriorated after it was pledged.

13

January 2010

Term Asset-Backed Securities Loan Facility
(TALF)
Recent Developments
• The December non-commercial mortgage-backed
securities TALF subscription supported the primary
issuance of six asset-backed securities (ABS) deals
worth a total of about $3.8 billion, of which approximately $2.3 billion was ﬁnanced through the TALF.
Approximately $0.7 billion in loans were also
extended against previously issued TALF-eligible
ABS collateral. In addition, $1.3 billion in TALF
loans were extended against legacy commercial
mortgage-backed securities (CMBS) collateral in the
December CMBS TALF subscription.
• On December 23, 2009, and January 11, 2010, the
Federal Reserve Bank of New York (FRBNY)
announced that the credit ratings of four nationally
recognized statistical rating organizations
(NRSROs)—DBRS, Inc.; Fitch Ratings; Moody’s
Investors Service; and Standard & Poor’s—would be
accepted for establishing the eligibility of selected
types of ABS as collateral by the TALF. These
NRSROs’ ratings will be eligible beginning with the
TALF’s February 2010 ABS subscription. This
action was taken in accordance with a rule adopted
by the Federal Reserve Board establishing criteria
for the FRBNY to determine the eligibility of ratings
issued by NRSROs for TALF purposes. The rule’s
eligibility requirements do not apply to discount window lending or to other extensions of credit provided
by the Federal Reserve System.

Background
On November 25, 2008, the Federal Reserve
announced the creation of the TALF under the authority of Section 13(3) of the Federal Reserve Act. The
TALF is a funding facility under which the FRBNY
extends credit with a term of up to ﬁve years to holders of eligible ABS. The TALF is intended to assist
ﬁnancial markets in accommodating the credit needs of
consumers and businesses of all sizes by facilitating
Table 20. TALF: Number of Borrowers and Loans
Outstanding
As of December 30, 2009
Lending program

Number of
borrowers

Borrowing
($ billions)

Non-CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

106
81
147

39
9
48

Note: Unaudited. “Number of borrowers” may not sum to total
because borrowers may be included in more than one category.
“Borrowing” amounts may not sum to total because of rounding.

the issuance of ABS collateralized by a variety of consumer and business loans; it is also intended to
improve market conditions for ABS more generally.
Eligible collateral initially included U.S. dollardenominated ABS that (1) are backed by student loans,
auto loans, credit card loans, and loans guaranteed by
the Small Business Administration (SBA) and (2) have
a credit rating in the highest investment-grade rating
category from two or more eligible NRSROs and do
not have a credit rating below the highest investmentgrade rating category from an eligible NRSRO. The
loans provided through the TALF are non-recourse,
meaning that the obligation of the borrower can be
discharged by surrendering the collateral to the
FRBNY. Borrowers commit their own risk capital in
the form of haircuts against the collateral, which serve
as the borrower’s equity in the transaction and act as a
buffer to absorb any decline in the collateral’s value in
the event the loan is not repaid. The U.S. Treasury is
providing protection against losses of up to $20 billion
to the FRBNY using funds authorized under the
Troubled Assets Relief Program (TARP) of the Emergency Economic Stabilization Act of 2008.
On February 10, 2009, the Federal Reserve Board
announced that it would consider expanding the size of
the TALF to as much as $1 trillion and potentially
broaden the eligible collateral to encompass other
types of newly issued AAA-rated ABS, such as ABS
backed by commercial mortgages or private-label (nonagency) ABS backed by residential mortgages. Any
expansion of the TALF would be supported by the
Treasury’s providing additional funds from the TARP.
As of December 30, 2009, however, the authorized
limit for the program remained at $200 billion.
Between March and May 2009, the Federal Reserve
expanded the range of eligible collateral for TALF
loans to include:
— ABS backed by loans or leases related to business equipment, leases of vehicle ﬂeets, ﬂoorplan
loans, mortgage servicing advances, and insurance premium ﬁnance loans; and
— newly issued commercial mortgage-backed securities (CMBS) and certain high-quality CMBS
issued before January 1, 2009 (so-called “legacy”
CMBS).
High-quality newly issued and legacy CMBS must
have at least two AAA ratings from a list of eligible
NRSROs—DBRS, Inc.; Fitch Ratings; Moody’s Investors Service; Realpoint; or Standard & Poor’s—and
must not have a rating below AAA from any of these
rating agencies.
The Federal Reserve also authorized TALF loans
with maturities of ﬁve years, available for the June
2009 funding, to ﬁnance purchases of CMBS, ABS

14

backed by student loans, and ABS backed by loans
guaranteed by the SBA. The Federal Reserve indicated
that up to $100 billion of TALF loans could have ﬁveyear maturities and that some of the interest on collateral ﬁnanced with a ﬁve-year loan may be diverted
toward an accelerated repayment of the loan, especially
in the fourth and ﬁfth years.
On September 1, 2009, the following four nonprimary dealer broker-dealers were named as agents
for the TALF: CastleOak Securities, LP; Loop Capital
Markets, LLC; Wells Fargo Securities, LLC; and The
Williams Capital Group, LP. These agents, like the
primary dealers, may represent borrowers in accessing
the facility.
On October 5, 2009, the Federal Reserve announced
two changes to the procedures for evaluating ABS
pledged to the TALF. The ﬁrst change was to propose
a rule that would establish criteria for the FRBNY to
use when determining which NRSROs’ ratings are
accepted for establishing the eligibility of ABS to be
pledged as collateral to the TALF. The rule establishing the process for approving NRSROs was ﬁnalized
on December 4, 2009. The second change required the
FRBNY to conduct a formal risk assessment of all proposed collateral in addition to continuing to require
that collateral for TALF loans receive two AAA ratings
from TALF-eligible NRSROs. These changes were
intended to promote competition among credit rating
agencies, ensure appropriate protection against credit
risk for the U.S. taxpayer, and ensure that TALF collateral continues to comply with the existing high standards for credit quality, transparency, and simplicity of
structure.
The Federal Reserve Board initially authorized the
offering of new TALF loans through December 31,
2009, but subsequently authorized an extension of the
program until March 31, 2010, for loans against newly
issued ABS and legacy CMBS, and until June 30,
2010, for loans against newly issued CMBS.

Collateral and Risk Management
Under the TALF, the FRBNY lends on a non-recourse
basis to holders of certain ABS backed by consumer,
business, and commercial mortgage loans. Eligible collateral for the TALF includes U.S. dollar-denominated
ABS that (1) have a credit rating in the highest longterm or, in the case of non-mortgage-backed ABS, the
highest short-term investment-grade rating category
(for example, AAA) from at least two eligible
NRSROs and (2) do not have a credit rating below the
highest investment-grade rating category from an eligible NRSRO. Eligible small-business-loan ABS also
include U.S. dollar-denominated cash ABS for which

Credit and Liquidity Programs and the Balance Sheet
Table 21A. Issuers of Non-CMBS that Collateralize
Outstanding TALF Loans
As of December 30, 2009
Issuers
AH Mortgage Advance Trust 2009-ADV2
AH Mortgage Advance Trust 2009-ADV3
Ally Auto Receivables Trust 2009-A
American Express Credit Account Master Trust
AmeriCredit Automobile Receivables Trust 2009-1
Bank of America Auto Trust 2009-1
Bank of America Auto Trust 2009-2
BMW Floorplan Master Owner Trust
BMW Vehicle Lease Trust 2009-1
Cabela’s Credit Card Master Note Trust
CarMax Auto Owner Trust 2009-1
CarMax Auto Owner Trust 2009-A
Chase Issuance Trust
Chesapeake Funding LLC
Chrysler Financial Auto Securitization Trust 2009-A
CIT Equipment Collateral 2009-VT1
Citibank Credit Card Issuance Trust
Citibank Omni Master Trust
CitiFinancial Auto Issuance Trust 2009-1
CNH Equipment Trust 2009-B
CNH Wholesale Master Note Trust
Discover Card Execution Note Trust
FIFC Premium Funding LLC
First National Master Note Trust
Ford Credit Auto Lease Trust 2009-A
Ford Credit Auto Owner Trust 2009-A
Ford Credit Auto Owner Trust 2009-B
Ford Credit Auto Owner Trust 2009-C
Ford Credit Auto Owner Trust 2009-D
Ford Credit Floorplan Master Owner Trust A
GE Capital Credit Card Master Note Trust
GE Dealer Floorplan Master Note Trust
GE Equipment Midticket LLC, Series 2009-1
Great America Leasing Receivables Funding, L.L.C.
Harley-Davidson Motorcycle Trust 2009-1
Harley-Davidson Motorcycle Trust 2009-2
Honda Auto Receivables 2009-2 Owner Trust
Honda Auto Receivables 2009-3 Owner Trust
Huntington Auto Trust 2009-1
Hyundai Auto Receivables Trust 2009-A
Hyundai Floorplan Master Owner Trust
John Deere Owner Trust 2009
MMAF Equipment Finance LLC 2009-A
MMCA Auto Owner Trust 2009-A
Navistar Financial Dealer Note Master Owner Trust
Nissan Auto Lease Trust 2009-A
Nissan Auto Receivables 2009-A Owner Trust
OCWEN Servicer Advance Receivables Funding Company II Ltd.
PFS Financing Corp.
SLC Private Student Loan Trust 2009-A
SLM Private Education Loan Trust 2009-B
SLM Private Education Loan Trust 2009-C
SLM Private Education Loan Trust 2009-CT
SLM Private Education Loan Trust 2009-D
U.S. Small Business Administration
Volkswagen Auto Lease Trust 2009-A
WHEELS SPV, LLC
World Financial Network Credit Card Master Note Trust
World Omni Auto Receivables Trust 2009-A
World Omni Master Owner Trust

Table 21B. Issuers of Newly Issued CMBS that
Collateralize Outstanding TALF Loans
As of December 30, 2009
Issuers
DDR I Depositor LLC Trust Series 2009-DDR1

15

January 2010
Table 21C. Issuers of Legacy CMBS that Collateralize
Outstanding TALF Loans

Table 21C. Issuers of Legacy CMBS that Collateralize
Outstanding TALF Loans—Continued

As of December 30, 2009

As of December 30, 2009
Issuers

Banc of America Commercial Mortgage Inc. Series 2004-1
Banc of America Commercial Mortgage Inc. Series 2004-2
Banc of America Commercial Mortgage Inc. Series 2004-3
Banc of America Commercial Mortgage Inc. Series 2004-4
Banc of America Commercial Mortgage Inc. Series 2005-1
Banc of America Commercial Mortgage Inc. Series 2005-2
Banc of America Commercial Mortgage Inc. Series 2005-3
Banc of America Commercial Mortgage Inc. Series 2005-5
Banc of America Commercial Mortgage Inc. Series 2005-6
Banc of America Commercial Mortgage Trust 2006-1
Banc of America Commercial Mortgage Trust 2006-2
Banc of America Commercial Mortgage Trust 2006-4
Banc of America Commercial Mortgage Trust 2006-5
Banc of America Commercial Mortgage Trust 2006-6
Banc of America Commercial Mortgage Trust 2007-1
Banc of America Commercial Mortgage Trust 2007-2
Banc of America Commercial Mortgage Trust 2007-3
Banc of America Commercial Mortgage Trust 2007-4
Banc of America Commercial Mortgage Trust 2007-5
Bear Stearns Commercial Mortgage Securities Trust 2004-PWR4
Bear Stearns Commercial Mortgage Securities Trust 2005-PWR10
Bear Stearns Commercial Mortgage Securities Trust 2005-PWR7
Bear Stearns Commercial Mortgage Securities Trust 2005-PWR8
Bear Stearns Commercial Mortgage Securities Trust 2005-PWR9
Bear Stearns Commercial Mortgage Securities Trust 2005-TOP20
Bear Stearns Commercial Mortgage Securities Trust 2006-PWR12
Bear Stearns Commercial Mortgage Securities Trust 2006-PWR13
Bear Stearns Commercial Mortgage Securities Trust 2006-PWR14
Bear Stearns Commercial Mortgage Securities Trust 2006-TOP22
Bear Stearns Commercial Mortgage Securities Trust 2006-TOP24
Bear Stearns Commercial Mortgage Securities Trust 2007-PWR15
Bear Stearns Commercial Mortgage Securities Trust 2007-PWR16
Bear Stearns Commercial Mortgage Securities Trust 2007-PWR17
Bear Stearns Commercial Mortgage Securities Trust 2007-PWR18
Bear Stearns Commercial Mortgage Securities Trust 2007-TOP26
Bear Stearns Commercial Mortgage Securities Trust 2007-TOP28
CD 2005-CD1 Commercial Mortgage Trust
CD 2006-CD2 Mortgage Trust
CD 2006-CD3 Mortgage Trust
CD 2007-CD4 Commercial Mortgage Trust
CD 2007-CD5 Mortgage Trust
Citigroup Commercial Mortgage Trust 2004-C1
Citigroup Commercial Mortgage Trust 2006-C4
Citigroup Commercial Mortgage Trust 2008-C7
COBALT CMBS Commercial Mortgage Trust 2006-C1
COBALT CMBS Commercial Mortgage Trust 2007-C2
COBALT CMBS Commercial Mortgage Trust 2007-C3
COMM 2004-LNB2 Mortgage Trust
COMM 2005-C6 Mortgage Trust
COMM 2005-LP5 Mortgage Trust
COMM 2006-C7 Mortgage Trust
COMM 2006-C8 Mortgage Trust
Commercial Mortgage Loan Trust 2008-LS1
Commercial Mortgage Trust 2004-GG1
Commercial Mortgage Trust 2005-GG3
Commercial Mortgage Trust 2005-GG5
Commercial Mortgage Trust 2006-GG7
Commercial Mortgage Trust 2007-GG9
Credit Suisse Commercial Mortgage Trust Series 2006-C1
Credit Suisse Commercial Mortgage Trust Series 2006-C3
Credit Suisse Commercial Mortgage Trust Series 2006-C4
Credit Suisse Commercial Mortgage Trust Series 2006-C5
Credit Suisse Commercial Mortgage Trust Series 2007-C2
Credit Suisse Commercial Mortgage Trust Series 2007-C3
Credit Suisse Commercial Mortgage Trust Series 2007-C5
CSFB Commercial Mortgage Trust 2004-C3
CSFB Commercial Mortgage Trust 2005-C1
CSFB Commercial Mortgage Trust 2005-C2
CSFB Commercial Mortgage Trust 2005-C3
CSFB Commercial Mortgage Trust 2005-C4
CSFB Commercial Mortgage Trust 2005-C5
CSFB Commercial Mortgage Trust 2005-C6
GE Commercial Mortgage Corporation Series 2004-C3
GE Commercial Mortgage Corporation Series 2005-C1
GE Commercial Mortgage Corporation Series 2005-C4
GE Commercial Mortgage Corporation, Series 2007-C1 Trust
GMAC Commercial Mortgage Securities, Inc. Series 2004-C3 Trust
GMAC Commercial Mortgage Securities, Inc. Series 2006-C1 Trust
GS Mortgage Securities Corporation II Series 2004-GG2

Issuers
GS Mortgage Securities Corporation II Series 2005-GG4
GS Mortgage Securities Trust 2006-GG6
GS Mortgage Securities Trust 2006-GG8
GS Mortgage Securities Trust 2007-GG10
J.P. Morgan Chase Commercial Mortgage Securities Corp. Series
2003-CIBC7
J.P. Morgan Chase Commercial Mortgage Securities Corp. Series
2004-C1
J.P. Morgan Chase Commercial Mortgage Securities Corp. Series
2004-C2
J.P. Morgan Chase Commercial Mortgage Securities Corp. Series
2004-C3
J.P. Morgan Chase Commercial Mortgage Securities Corp. Series
2004-CIBC10
J.P. Morgan Chase Commercial Mortgage Securities Corp. Series
2004-CIBC8
J.P. Morgan Chase Commercial Mortgage Securities Corp. Series
2004-PNC1
J.P. Morgan Chase Commercial Mortgage Securities Corp. Series
2005-CIBC11
J.P. Morgan Chase Commercial Mortgage Securities Corp. Series
2005-CIBC13
J.P. Morgan Chase Commercial Mortgage Securities Corp. Series
2005-LDP1
J.P. Morgan Chase Commercial Mortgage Securities Corp. Series
2005-LDP2
J.P. Morgan Chase Commercial Mortgage Securities Corp. Series
2005-LDP4
J.P. Morgan Chase Commercial Mortgage Securities Corp. Series
2005-LDP5
J.P. Morgan Chase Commercial Mortgage Securities Trust 2006-CIBC14
J.P. Morgan Chase Commercial Mortgage Securities Trust 2006-CIBC15
J.P. Morgan Chase Commercial Mortgage Securities Trust 2006-CIBC16
J.P. Morgan Chase Commercial Mortgage Securities Trust 2006-CIBC17
J.P. Morgan Chase Commercial Mortgage Securities Trust 2006-LDP6
J.P. Morgan Chase Commercial Mortgage Securities Trust 2006-LDP8
J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP11
J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP12
LB Commercial Mortgage Trust 2007-C3
LB-UBS Commercial Mortgage Trust 2004-C1
LB-UBS Commercial Mortgage Trust 2004-C2
LB-UBS Commercial Mortgage Trust 2004-C4
LB-UBS Commercial Mortgage Trust 2004-C7
LB-UBS Commercial Mortgage Trust 2005-C2
LB-UBS Commercial Mortgage Trust 2005-C3
LB-UBS Commercial Mortgage Trust 2006-C1
LB-UBS Commercial Mortgage Trust 2006-C3
LB-UBS Commercial Mortgage Trust 2006-C6
LB-UBS Commercial Mortgage Trust 2006-C7
LB-UBS Commercial Mortgage Trust 2007-C1
LB-UBS Commercial Mortgage Trust 2007-C2
LB-UBS Commercial Mortgage Trust 2007-C6
LB-UBS Commercial Mortgage Trust 2007-C7
LB-UBS Commercial Mortgage Trust 2008-C1
Merrill Lynch Mortgage Trust 2003-KEY1
Merrill Lynch Mortgage Trust 2004-KEY2
Merrill Lynch Mortgage Trust 2005-CIP1
Merrill Lynch Mortgage Trust 2005-LC1
Merrill Lynch Mortgage Trust 2005-MKB2
Merrill Lynch Mortgage Trust 2006-C1
ML-CFC Commercial Mortgage Trust 2006-2
ML-CFC Commercial Mortgage Trust 2006-3
ML-CFC Commercial Mortgage Trust 2006-4
ML-CFC Commercial Mortgage Trust 2007-5
ML-CFC Commercial Mortgage Trust 2007-6
ML-CFC Commercial Mortgage Trust 2007-7
ML-CFC Commercial Mortgage Trust 2007-9
Morgan Stanley Capital I Trust 2003-IQ4
Morgan Stanley Capital I Trust 2004-TOP13
Morgan Stanley Capital I Trust 2005-HQ5
Morgan Stanley Capital I Trust 2005-HQ6
Morgan Stanley Capital I Trust 2005-HQ7
Morgan Stanley Capital I Trust 2005-IQ9
Morgan Stanley Capital I Trust 2006-HQ10
Morgan Stanley Capital I Trust 2006-HQ8
Morgan Stanley Capital I Trust 2006-IQ11
Morgan Stanley Capital I Trust 2006-IQ12
Morgan Stanley Capital I Trust 2006-TOP21
Morgan Stanley Capital I Trust 2006-TOP23

16

Credit and Liquidity Programs and the Balance Sheet

Table 21C. Issuers of Legacy CMBS that Collateralize
Outstanding TALF Loans—Continued

Table 22. TALF Collateral by Underlying Loan Type
Billions of dollars, as of December 30, 2009

As of December 30, 2009
Type of collateral
Issuers
Morgan Stanley Capital I Trust 2007-HQ11
Morgan Stanley Capital I Trust 2007-IQ14
Morgan Stanley Capital I Trust 2007-IQ15
Morgan Stanley Capital I Trust 2007-TOP27
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust
Wachovia Bank Commercial Mortgage Trust

Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series

2002-C1
2003-C9
2004-C12
2004-C14
2005-C16
2005-C17
2005-C19
2005-C20
2005-C22
2006-C23
2006-C24
2006-C25
2006-C26
2006-C27
2006-C28
2006-C29
2007-C30
2007-C31
2007-C32
2007-C33

all of the underlying credit exposures are fully guaranteed as to principal and interest by the full faith and
credit of the U.S. government. All or substantially all
of the credit exposures underlying eligible ABS must
be exposures to U.S.-domiciled obligors or with
respect to real property located in the United States or
its territories. The underlying credit exposures of eligible ABS must be student loans, auto loans, credit
card loans, loans or leases relating to business equipment, leases of vehicle ﬂeets, ﬂoorplan loans, mortgage
servicing advances, insurance premium ﬁnance loans,
commercial mortgages, or loans guaranteed by the
SBA. Except for ABS for which the underlying credit
exposures are SBA-guaranteed loans, eligible newly
issued ABS must be issued on or after January 1,
2009. Eligible legacy CMBS must be issued before
January 1, 2009, must be senior in payment priority to
all other interests in the underlying pool of commercial
mortgages, and must meet certain other criteria
designed to protect the Federal Reserve and the Treasury from credit risk. In almost all cases, eligible collateral for a particular borrower must not be backed by
loans originated or securitized by the borrower or by
an affiliate of the borrower.
The FRBNY’s loan is secured by the ABS collateral,
with the FRBNY lending an amount equal to the market value of the ABS, less a haircut. The lendable
value of the ABS may be adjusted based on a risk
assessment by the FRBNY. The Federal Reserve has
set initial haircuts for each type of eligible collateral to
reﬂect an assessment of the riskiness and maturity of
the various types of eligible ABS. Breakdowns of
TALF collateral by underlying loan type and credit
rating are shown in tables 22 and 23, respectively.

Value

By underlying loan type
Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Newly issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floorplan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premium service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Servicing advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Small business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Student loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6
10
*
10
22
1
1
3
1
1
7
53

Note: Unaudited. Components may not sum to total because of
rounding. Data represent the face value of collateral.
* Less than $500 million.

Table 23. TALF Collateral by Rating
Billions of dollars, as of December 30, 2009
Type of collateral

Value

Asset-backed securities with minimum rating of:1
AAA/Aaa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AA+/Aa+ to AA-/Aa- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

53
*
53

Note: Unaudited. Components may not sum to total because of
rounding. Data represent the face value of collateral.
1. Eligible ABS collateral for the TALF must have a credit rating in
the highest long-term or, in the case of non-mortgage-backed ABS, the
highest short-term investment-grade rating category from at least two
eligible NRSROs and must not have a credit rating below the highest
investment-grade rating category from an eligible NRSRO. When pledged
collateral is downgraded below the highest investment-grade rating,
existing loans against the collateral remain outstanding. However, the
ABS may not be used as collateral for any new TALF loans until it
regains its status as eligible collateral.
* Less than $500 million.

TALF LLC, a limited liability company formed to
purchase and manage any asset-backed securities that
might be received by the FRBNY in connection with
the TALF, has committed to purchase, for a fee, all
ABS received by the FRBNY in conjunction with a
TALF loan at a price equal to the TALF loan, plus
accrued but unpaid interest. Purchases of these securities are funded ﬁrst through the fees received by the
LLC and any interest the LLC has earned on its
investments. In the event that such funding proves
insufficient, the U.S. Treasury’s Troubled Asset Relief
Program (TARP) will provide additional subordinated
debt funding to TALF LLC to ﬁnance up to $20 billion
of asset purchases. Subsequently, the FRBNY will
ﬁnance any additional purchases of securities by providing senior debt funding to TALF LLC. Thus, the
TARP funds provide credit protection to FRBNY.
Financial information on TALF LLC is reported
weekly in tables 1, 2, 8, 10, and 11 of the H.4.1 statistical release. As of December 30, 2009, TALF LLC
had purchased no assets from the FRBNY.

17

January 2010

Lending in Support of Speciﬁc Institutions
Quarterly Developments

Table 25. Maiden Lane LLC Outstanding Principal
Balance of Loans

• Net income, including changes in valuation, for the
Maiden Lane, Maiden Lane II, and Maiden Lane III
LLCs was $0.3 billion, $1.8 billion, and $3.7 billion,
respectively, for the quarter ended September 30,
2009. As presented in table 24, these changes
resulted in improvements to the fair value asset coverage of loans by the Federal Reserve Bank of New
York (FRBNY) to the Maiden Lane LLCs.
• Cash ﬂows generated from the Maiden Lane II and
Maiden Lane III portfolios are used to pay down the
loans from the FRBNY. As shown in tables 29 and
32, those repayments totaled about $3.8 billion in the
third quarter of 2009.

Millions of dollars

Background
During the ﬁnancial crisis, the Federal Reserve has
extended credit to certain speciﬁc institutions in order
to avert disorderly failures that could result in severe
dislocations and strains for the ﬁnancial system as a
whole and harm the U.S. economy. In certain other
cases, the Federal Reserve has committed to extend
credit, if necessary, to support important ﬁnancial
ﬁrms.

FRBNY
senior
loan
Principal balance at closing . . . . . . . . . . . . . . . .
Most Recent Quarterly Activity
Principal balance on 6/30/2009 (including
accrued and capitalized interest) . . . . . . . . .
Accrued and capitalized interest
6/30/2009 to 9/30/2009 . . . . . . . . . . . . . . . . .
Repayment during the period from
6/30/2009 to 9/30/2009 . . . . . . . . . . . . . . . . . .
Principal balance on 9/30/2009 (including
accrued and capitalized interest) . . . . . . . . .

JPMC
subordinate
loan

28,820

1,150

29,159

1,217

37

16

0

0

29,196

1,233

Note: Unaudited. As part of the asset purchase agreement, JPMC made
a loan to Maiden Lane LLC. For repayment purposes, this obligation is
subordinated to the senior loan extended by the FRBNY.

related securities, residential and commercial mortgage
loans, and associated hedges from Bear Stearns. The
LLC is managing its assets through time to maximize
the repayment of credit extended to the LLC and to
minimize disruption to the ﬁnancial markets. In the
second quarter of 2008, the FRBNY extended credit to
Maiden Lane LLC. Details of the terms of the loan are
published on the FRBNY website
(www.newyorkfed.org/markets/maidenlane.html). The
assets of Maiden Lane LLC are presented weekly in
tables 1, 10, and 11 of the H.4.1 statistical release.

Bear Stearns and Maiden Lane LLC
In March 2008, the FRBNY and JPMorgan Chase &
Co. (JPMC) entered into an arrangement related to
ﬁnancing provided by the FRBNY to facilitate the
merger of JPMC and the Bear Stearns Companies Inc.
In connection with the transaction, the Federal Reserve
Board authorized the FRBNY, under Section 13(3) of
the Federal Reserve Act, to extend credit to a Delaware limited liability company, Maiden Lane LLC, to
partially fund the purchase of a portfolio of mortgageTable 24. Fair Value Asset Coverage
Millions of dollars
Fair value asset
coverage of FRBNY
loan on 9/30/2009
Maiden Lane LLC . . . . . . .
Maiden Lane II LLC . . . . .
Maiden Lane III LLC . . . .

Fair value asset
coverage of FRBNY
loan on 6/30/2009

(3,055)
(604)
3,645

(3,400)
(2,371)
(129)

Note: Unaudited. Fair value asset coverage is the amount by which the
fair value of the net portfolio assets of each LLC (refer to table 38) is
greater or less than the outstanding balance of the loans extended by the
FRBNY, including accrued interest.

Table 26. Maiden Lane LLC Summary of Portfolio
Composition, Cash and Cash Equivalents, and Other
Assets and Liabilities
Millions of dollars
Fair Value on Fair Value on
9/30/2009
6/30/2009
Agency MBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-agency RMBS . . . . . . . . . . . . . . . . . . . . . . . .
Commercial loans . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swap contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TBA commitments1 . . . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . .
Other assets2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities3 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17,437
1,938
4,025
623
1,318
382
863
1,446
527
(2,418)
26,141

16,424
1,962
4,447
683
1,827
1,199
736
1,805
827
(4,151)
25,759

Note: Unaudited. Components may not sum to totals because of
rounding.
1. To be announced (TBA) commitments are commitments to purchase
or sell mortgage-backed securities for a ﬁxed price at a future date.
2. Including interest and principal receivable and other receivables.
3. Including amounts payable for securities purchased, collateral posted
to Maiden Lane LLC by swap counterparties, and other liabilities and
accrued expenses.

18

Credit and Liquidity Programs and the Balance Sheet

Table 27. Maiden Lane LLC Securities Distribution by Sector and Rating Percent, as of September 30, 2009
Sector1
Agency MBS2 . . . . . . . . . . . . . . . . . .
Non-agency RMBS . . . . . . . . . . . .
Other2 . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rating
AAA

AA+ to AA−

A+ to A−

0.0
0.5
1.5
2.0

0.0
0.6
0.9
1.5

0.0
0.8
0.3
1.1

BBB+ to BBB− BB+ and lower
0.0
0.4
0.9
1.3

0.0
7.3
0.7
8.0

Gov’t/ Agency

Total

86.2
0.0
0.0
86.2

86.2
9.6
4.3
100.0

Note: Unaudited. This table presents the sector and ratings composition of the securities in the Maiden Lane LLC portfolio as a percentage of all
securities in the portfolio. It is based on the fair value of the securities. Lowest of all ratings is used for purposes of this table. Rows and columns may not
sum to totals because of rounding.
1. Does not include Maiden Lane LLC’s swaps and other derivative contracts, commercial and residential mortgage loans, and TBA commitments.
2. Includes all asset sectors that, individually, represent less than 5 percent of the aggregate fair value of securities in the portfolio.

Figure 2. Maiden Lane LLC Securities Distribution as of September 30, 2009

Additional details on the accounts of Maiden Lane
LLC are presented in table 4 of the H.4.1 statistical
release.
Information about the assets and liabilities of
Maiden Lane LLC is presented as of September 30,
2009, in tables 25 through 27 and ﬁgure 2. This information is updated on a quarterly basis.

American International Group (AIG)
Recent Developments
• As shown in table 28, the balance on the AIG
revolving credit facility decreased from $45.1 billion
to $22.0 billion between November 25, 2009, and
Table 28. AIG Revolving Credit Facility
Billions of dollars
Value
Balance on November 25, 2009 . . . . . . . . . . . . . . . . . . . . . . .
Principal drawdowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal repayments and reductions . . . . . . . . . . . . . . . .
Recapitalized interest and fees . . . . . . . . . . . . . . . . . . . . . .
Amortization of restructuring allowance . . . . . . . . . . . .
Balance on December 30, 2009 . . . . . . . . . . . . . . . . . . . . . . .

45.1
3.7
(27.6)
0.7
0.2
22.0

Note: Unaudited. Components may not sum to total because of
rounding. Does not include Maiden Lane II LLC and Maiden Lane III
LLC.

December 30, 2009. The decline was driven by
$27.6 billion of principal repayments and reductions.
In particular, in transactions completed on December
1, 2009, the Federal Reserve Bank of New York
(FRBNY) received $25 billion in preferred interests
in two special purpose vehicles (SPVs) established
by AIG to hold all of the equity of American International Assurance Company (AIA) and American
Life Insurance Company (ALICO) in exchange for a
$25 billion reduction in the balance of the credit
facility. As part of this exchange, the amount of
credit available to AIG under the FRBNY’s revolving credit facility was reduced by $25 billion as
well. Excluding capitalized interest and fees, the
ceiling on the revolving credit facility was lowered
from $60 billion to $35 billion on December 1,
2009. The transactions were previously announced as
part of the March 2009 restructuring of the government’s assistance to AIG.
• AIG has chosen global coordinators for a potential
initial public offering (IPO) of AIA. Depending on
market conditions and subject to customary regulatory approvals, the IPO may occur as early as this
year. The proceeds generated from the IPO would be
used to redeem AIA preferred interests held by the
FRBNY.

19

January 2010

• Moody’s Investors Service downgraded two subsidiaries of AIG, International Lease Finance Corporation (ILFC) and American General Finance (AGF).
ILFC’s senior unsecured debt rating was reduced by
four notches, from Baa3 to B1, and AGF’s senior
unsecured debt rating was reduced by ﬁve notches,
from Baa3 to B2. The downgrades did not have an
immediate impact on the credit rating of AIG, Inc.

Background
On September 16, 2008, the Federal Reserve, with the
full support of the Treasury Department, announced
that it would lend to AIG to prevent a disorderly failure of this systemically important ﬁrm, protect the
ﬁnancial system and the broader economy, and provide
the company time to restructure its operations in an
orderly manner. Initially, the FRBNY extended an
$85 billion line of credit to the company. The terms of
the credit facility are disclosed on the Board’s website
(www.federalreserve.gov/monetarypolicy/
bst_supportspeciﬁc.htm). Loans outstanding under this

facility are presented weekly in table 1 of the H.4.1
statistical release and included in “Other loans” in
tables 10 and 11 of the H.4.1 statistical release.
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 limited liability companies
(LLCs) were created, Maiden Lane II LLC and Maiden
Lane III LLC, and the line of credit extended to AIG
was reduced from $85 billion to $60 billion. (On October 8, 2008, the FRBNY was authorized to extend
credit under a special securities borrowing facility to
certain AIG subsidiaries. This arrangement was discontinued after the establishment of the Maiden Lane II
facility.) More detail on these LLCs is reported in the
remainder of this section. Additional information is
included in tables 5 and 6 of the H.4.1 statistical
release.
On March 2, 2009, the Federal Reserve and the
Treasury announced an additional restructuring of the
government’s assistance to AIG, designed to enhance
the company’s capital and liquidity in order to facili-

Figure 3. AIG Revolving Credit

Note: The above data illustrate selected components of the amount of credit extended to the American International Group Inc., including loan
principal, all capitalized interest and fees, and the amortized portion of the initial commitment fee. The data exclude commercial paper sold
by AIG and its subsidiaries to the Commercial Paper Funding Facility as well as amounts borrowed prior to December 12, 2008, under a
securities borrowing arrangement. The facility ceiling represents the limit on the credit agreement plus capitalized interest and fees. Until
December 1, 2009, the ceiling was $60 billion (excluding capitalized interest and fees); on December 1, 2009, it was reduced to $35 billion.

20

tate the orderly completion of the company’s global
divestiture program. Additional information on the
restructuring is available at www.federalreserve.gov/
newsevents/press/other/20090302a.htm.
On April 17, 2009, the FRBNY implemented a loan
restructuring adjustment that was previously approved
and announced on March 2. The interest rate on the
loan to AIG, which was the three-month Libor plus
300 basis points, was modiﬁed by removing the existing interest rate ﬂoor of 3.5 percent on the Libor component. Consistent with U.S. generally accepted
accounting principles (GAAP), as of July 29, 2009, the
reported value of the AIG revolving credit extension
was reduced by a $1.3 billion adjustment to reﬂect the
loan restructuring. This restructuring adjustment is
intended to recognize the economic effect of the
reduced interest rate and will be recovered as the
adjustment is amortized over the remaining term of the
credit extension. The Federal Reserve expects that the
credit extension, including interest and commitment
fees under the modiﬁed terms, will be fully repaid.
On June 25, 2009, the FRBNY entered into agreements with AIG to carry out two transactions previously approved and announced on March 2, 2009, as
part of the restructuring of the U.S. government’s
assistance to AIG. These transactions were completed
on December 1, 2009. Under these agreements, the
FRBNY received preferred interests in two SPVs
formed to hold the outstanding common stock of
AIG’s largest foreign insurance subsidiaries, American
International Assurance Company Ltd. (AIA) and
American Life Insurance Company (ALICO). In
exchange, upon the closing of each transaction and the
resulting issuance of preferred interests, the outstanding balance held by, and amount available to, AIG
(excluding capitalized interest and fees) under the
revolving credit facility was reduced by $25 billion.
Speciﬁcally, the maximum amount available was
reduced from $60 billion to $35 billion. By establishing the AIA and ALICO special purpose vehicles as
separate legal entities, these transactions positioned
AIA and ALICO for future initial public offerings,
depending on market conditions. Subject to certain
conditions, proceeds from any public offerings by the
companies must ﬁrst be used to fully redeem the FRBNY’s preferred interests.
The interest rate on the loan to AIG is the threemonth Libor, plus 300 basis points. The lending under
this facility is secured by a pledge of assets of AIG
and its primary nonregulated subsidiaries, including all
or a substantial portion of AIG’s ownership interest in
its regulated U.S. and foreign subsidiaries. Furthermore, AIG’s obligations to the FRBNY are guaranteed

Credit and Liquidity Programs and the Balance Sheet

by certain domestic, nonregulated subsidiaries of AIG
with more than $50 million in assets.
Figure 3 shows the amount of credit extended to
AIG over time through the credit facility, including the
principal, interest, and commitment fees, along with
the facility ceiling.

Maiden Lane II LLC
Under Section 13(3) of the Federal Reserve Act, the
Federal Reserve Board authorized the FRBNY to lend
up to $22.5 billion to a newly formed Delaware limited liability company, Maiden Lane II LLC, to partially fund the purchase of residential mortgage-backed
securities (RMBS) from the securities lending portfolio
of several regulated U.S. insurance subsidiaries of
Table 29. Maiden Lane II LLC Outstanding Principal
Balance of Senior Loan and Fixed Deferred Purchase
Price
Millions of dollars
FRBNY
senior
loan
Principal balance at closing . . . . . . . . . . . . . . . .
Most Recent Quarterly Activity
Principal balance on 6/30/2009 (including
accrued and capitalized interest) . . . . . . . . .
Accrued and capitalized interest
6/30/2009 to 9/30/2009 . . . . . . . . . . . . . . . . . .
Repayment during the period from
6/30/2009 to 9/30/2009 . . . . . . . . . . . . . . . . . .
Principal balance on 9/30/2009 (including
accrued and capitalized interest) . . . . . . . . .

AIG ﬁxed
deferred
purchase
price

19,494

1,000

17,712

1,020

55

8

(966)

0

16,801

1,028

Note: Unaudited. As part of the asset purchase agreement, AIG
subsidiaries were entitled to receive from Maiden Lane II LLC a ﬁxed
deferred purchase price plus interest on the amount. This obligation is
subordinated to the senior loan extended by the FRBNY, and it reduced
the amount paid by Maiden Lane II LLC for the assets by a
corresponding amount.

Table 30. Maiden Lane II LLC Summary of RMBS
Portfolio Composition, Cash and Cash Equivalents, and
Other Assets and Liabilities
Millions of dollars
Fair Value on Fair Value on
9/30/2009
6/30/2009
Alt-A (ARM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subprime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Option ARM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . .
Other assets2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities3 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,903
8,758
939
1,299
297
3
(2)
16,197

4,455
8,348
840
1,371
327
3
(2)
15,341

Note: Unaudited. Components may not sum to totals because of
rounding.
1. Includes all asset sectors that, individually, represent less than 5
percent of aggregate outstanding fair value of securities in the portfolio.
2. Including interest and principal receivable and other receivables.
3. Including accrued expenses and other payables.

21

January 2010
Table 31. Maiden Lane II LLC Securities Distribution by Sector and Rating
Percent, as of September 30, 2009
RMBS sector
Alt-A (ARM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subprime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Option ARM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rating
AAA

AA+ to AA−

A+ to A−

0.9
8.1
0.0
0.1
9.1

3.0
3.0
0.0
0.6
6.6

2.6
2.9
0.0
0.0
5.5

BBB+ to BBB− BB+ and lower
1.4
2.6
0.0
0.0
4.0

23.0
38.5
5.9
7.4
74.7

Total
30.8
55.1
5.9
8.2
100.0

Note: Unaudited. This table presents the sector and ratings composition of Maiden Lane II LLC’s RMBS portfolio as a percentage of aggregate fair
value of the securities in the portfolio. Lowest of all ratings is used for the purposes of this table. Rows and columns may not sum to totals because of
rounding.
1. Includes all asset sectors that, individually, represent less than 5 percent of the aggregate fair value of securities in the portfolio.

Figure 4. Maiden Lane II LLC Securities Distribution as of September 30, 2009

AIG. On December 12, 2008, the FRBNY loaned
about $19.5 billion to Maiden Lane II LLC. Details of
the terms of the loan are published on the FRBNY
website (www.newyorkfed.org/markets/
maidenlane2.html).
The net portfolio holdings of Maiden Lane II LLC
are presented in tables 1, 10, and 11 of the weekly
H.4.1 statistical release. Additional detail on the
accounts of Maiden Lane II LLC is presented in table
5 of the H.4.1 statistical release.
Information about the assets and liabilities of
Maiden Lane II LLC is presented as of September 30,
2009, in tables 29 through 31 and ﬁgure 4. This information is updated on a quarterly basis.

Maiden Lane III LLC
Under Section 13(3) of the Federal Reserve Act, the
Federal Reserve Board authorized the FRBNY to lend
up to $30 billion to a newly formed Delaware limited
liability company, Maiden Lane III LLC, to fund the
purchase of certain asset-backed collateralized debt

obligations (ABS CDOs) from certain counterparties of
AIG Financial Products Corp. (AIGFP) on which
AIGFP had written credit default swaps and similar
contracts. On November 25, 2008, the FRBNY loaned
about $24.4 billion to Maiden Lane III LLC to partially fund the purchase of ABS CDOs. Details of the
terms of the loan are published on the FRBNY website
(www.newyorkfed.org/markets/maidenlane3.html).
Assets of the portfolio of the LLC will be managed to
maximize cash ﬂows to ensure repayment of obligations of the LLC while minimizing disruptions to
ﬁnancial markets.
The net portfolio holdings of Maiden Lane III LLC
are presented in tables 1, 10, and 11 of the weekly
H.4.1 statistical release. Additional detail on the
accounts of Maiden Lane III LLC is presented in table
6 of the H.4.1 statistical release.
Information about the assets and liabilities of
Maiden Lane III LLC is presented as of September 30,
2009, in tables 32 through 34 and ﬁgure 5. This information is updated on a quarterly basis.

22

Credit and Liquidity Programs and the Balance Sheet

Table 32. Maiden Lane III LLC Outstanding Principal
Balance of Senior Loan and Equity Contribution

Table 33. Maiden Lane III LLC Summary of Portfolio
Composition, Cash and Cash Equivalents, and Other
Assets and Liabilities

Millions of dollars

Millions of dollars
FRBNY
senior
loan
Principal balance at closing . . . . . . . . . . . . . . . .
Most Recent Quarterly Activity
Principal balance on 6/30/2009 (including
accrued and capitalized interest) . . . . . . . . .
Accrued and capitalized interest
6/30/2009 to 9/30/2009 . . . . . . . . . . . . . . . . . .
Repayment during the period from
6/30/2009 to 9/30/2009 . . . . . . . . . . . . . . . . . .
Principal balance on 9/30/2009 (including
accrued and capitalized interest) . . . . . . . . .

AIG
equity
contribution

24,339

5,000

22,614

5,108

66

43

(2,825)

Fair Value on Fair Value on
9/30/2009
6/30/2009
High-grade ABS CDO . . . . . . . . . . . . . . . . . . . . .
Mezzanine ABS CDO . . . . . . . . . . . . . . . . . . . . .
Commercial real estate CDO . . . . . . . . . . . . . .
RMBS, CMBS, & Other . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . .
Other assets1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities2 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0

19,855

16,001
2,099
4,572
246
547
38
(3)
23,500

14,491
1,882
4,186
225
1,645
59
(4)
22,485

Note: Unaudited. Components may not sum to totals because of
rounding.
1. Including interest and principal receivable and other receivables.
2. Including accrued expenses.

5,151

Note: Unaudited. As part of the asset purchase agreement, AIG
purchased a $5 billion equity contribution, which is subordinated to the
senior loan extended by FRBNY.

Table 34. Maiden Lane III LLC Securities Distribution by Sector, Vintage, and Rating
Percent, as of September 30, 2009
Sector and vintage1
High-grade ABS CDO . . . . . . . . . . .
Pre-2005 . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mezzanine ABS CDO . . . . . . . . . . . .
Pre-2005 . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate CDO . . . . .
Pre-2005 . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . .
RMBS, CMBS, and other . . . . . . . .
Pre-2005 . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rating
AAA

AA+ to AA−

A+ to A−

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.9
1.9
0.0
0.0
0.0
0.2
0.0
0.2
0.0
0.0
2.1

0.0
0.0
0.0
0.0
0.0
0.2
0.2
0.0
0.0
0.0
0.5
0.5
0.0
0.0
0.0
0.2
0.0
0.1
0.0
0.0
0.8

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
17.6
2.8
0.0
0.0
14.8
0.1
0.0
0.1
0.0
0.0
17.7

BBB+ to BBB- BB+ and lower
0.7
0.7
0.0
0.0
0.0
1.4
1.0
0.0
0.0
0.4
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.1
0.0
0.0
2.2

69.1
23.9
30.1
7.5
7.6
7.3
4.0
2.9
0.0
0.3
0.0
0.0
0.0
0.0
0.0
0.5
0.1
0.4
0.1
0.0
76.9

Not rated

Total

0.0
0.0
0.0
0.0
0.0
0.3
0.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.3

69.8
24.6
30.1
7.5
7.6
9.2
5.5
2.9
0.0
0.7
20.0
5.2
0.0
0.0
14.8
1.1
0.2
0.8
0.1
0.0
100.0

Note: Unaudited. This table presents the sector, vintage, and rating composition of the securities in the Maiden Lane III LLC portfolio as a percentage
of all securities in the portfolio. It is based on the fair value of the securities. Lowest of all ratings is used for purposes of this table. Rows and columns
may not sum to totals because of rounding.
1. The year of issuance with the highest concentration of underlying assets as measured by outstanding principal balance determines the vintage of the
CDO.

Figure 5. Maiden Lane III LLC Securities Distribution as of September 30, 2009

23

January 2010

Citigroup

Bank of America

On November 23, 2008, the Treasury, the Federal
Reserve, and the Federal Deposit Insurance Corporation (FDIC) jointly announced that the U.S. government would provide support to Citigroup in an effort
to support ﬁnancial markets. The terms of the arrangement, under which the government parties had agreed
to provide certain loss protections and liquidity supports to Citigroup with respect to a designated pool of
$301 billion of assets, are provided on the Federal
Reserve Board’s website (www.federalreserve.gov/
monetarypolicy/bst_supportspeciﬁc.htm). The FRBNY
has not extended credit to Citigroup under this
arrangement.

On January 16, 2009, the Treasury, the Federal
Reserve, and the FDIC jointly announced that the U.S.
government had agreed to provide certain support to
Bank of America to promote ﬁnancial market stability.
Information concerning these actions is available on
the Federal Reserve Board’s website at
www.federalreserve.gov/monetarypolicy/
bst_supportspeciﬁc.htm.
On May 7, 2009, following the release of the results
of the Supervisory Capital Assessment Program, Bank
of America announced that it did not plan to move
forward with a part of the package of supports
announced in January 2009—speciﬁcally, a residual
ﬁnancing arrangement with the Federal Reserve and
the related guarantee protections that would be provided by the Treasury and the FDIC with respect to an
identiﬁed pool of approximately $118 billion in assets.

On December 23, 2009, the Treasury, the Federal
Reserve, and the FDIC agreed to terminate the Master
Agreement dated January 15, 2009, with Citigroup Inc.
In consideration for terminating the Master Agreement,
the FRBNY received a $50 million termination fee
from Citigroup. Outstanding expenses in connection
with the Master Agreement and not yet reimbursed by
Citigroup will continue to be reimbursable.

In September 2009, Bank of America paid an exit
fee in order to terminate the term sheet, which was
never implemented, with the Treasury, the Federal
Reserve, and the FDIC. The Federal Reserve’s portion
of the exit fee was $57 million.

24

Credit and Liquidity Programs and the Balance Sheet

Federal Reserve Banks’ Financial Tables
Quarterly Developments
• The daily average balance of the Federal Reserve
System Open Market Account (SOMA) holdings
exceeded $1 trillion during the ﬁrst three quarters of
2009 (table 36). Net earnings from the portfolio
amounted to approximately $32 billion during this
period; most of the earnings are attributable to the
holdings of U.S. government securities and agencyguaranteed mortgage-backed securities (MBS).
• Net earnings from Federal Reserve loan programs
over the ﬁrst three quarters of the year amounted to
about $2.2 billion; interest earned on Term Auction
Facility (TAF) loans and credit extended to American International Group, Inc. (AIG) accounted for
most of the total (table 37).
• After providing for the payment of dividends and
reservation of an amount necessary to equate surplus
with capital paid-in, distributions to the U.S. Treasury as interest on Federal Reserve notes totaled
$27 billion during the ﬁrst three quarters of 2009, as
noted in table 35.

Background
The Federal Reserve Banks annually prepare ﬁnancial
statements reﬂecting balances as of December 31 and
income and expenses for the year then ended. The
Federal Reserve Bank ﬁnancial statements also include
the accounts and results of operations of several limited liability companies (LLCs) that have been consolidated with the Federal Reserve Bank of New York
(FRBNY) (the “consolidated LLCs”).
The Board of Governors, the Federal Reserve
Banks, and the consolidated LLCs are all subject to
several levels of audit and review. The Reserve Banks’
ﬁnancial statements and those of the consolidated LLC
entities are audited annually by a registered independent public accountant retained by the Board of Governors. To ensure auditor independence, the Board
requires that the external auditor be independent in all
matters relating to the audit. Speciﬁcally, the external
auditor may not perform services for the Reserve
Banks or others that would place it in a position of
auditing its own work, making management decisions
on behalf of the Reserve Banks, or in any other way
impairing its audit independence. In addition, the
Reserve Banks, including the consolidated LLCs, are
subject to oversight by the Board.

The Board of Governors’ ﬁnancial statements are
audited annually by an independent audit ﬁrm retained
by the Board’s Office of Inspector General. The audit
ﬁrm also provides a report on compliance and on internal control over ﬁnancial reporting in accordance with
government auditing standards. The Office of Inspector
General also conducts audits, reviews, and investigations relating to the Board’s programs and operations
as well as of Board functions delegated to the Reserve
Banks.
Audited annual ﬁnancial statements for the Reserve
Banks and Board of Governors are available at
www.federalreserve.gov/monetarypolicy/
bst_fedﬁnancials.htm. On a quarterly basis, the Federal
Reserve prepares unaudited updates of tables presented
in the Annual Report.

Combined Statement of Income and
Comprehensive Income
Table 35 presents unaudited combined Reserve Bank
income and expense information for the ﬁrst three
quarters of this year. Tables 36 through 38 present
information for the SOMA portfolio, the Federal
Reserve loan programs, and the variable interest
entities—the Commercial Paper Funding Facility
(CPFF) and Maiden Lane, Maiden Lane II, and
Maiden Lane III LLCs—for the ﬁrst three quarters of
this year. These tables are updated quarterly.

SOMA Financial Summary
Table 36 shows the Federal Reserve’s average daily
balance of assets and liabilities in the SOMA portfolio
for the period from January 1, 2009, though September
30, 2009, the related interest income and expense, and
the realized and unrealized gains and losses for the
ﬁrst three quarters of the year. U.S. government and
agency securities, as well as agency-guaranteed MBS
making up the SOMA portfolio, are recorded at amortized cost on a settlement-date basis. Rather than using
a fair value presentation, an amortized cost presentation more appropriately reﬂects the Reserve Banks’
purpose for holding these securities given the Federal
Reserve’s unique responsibility to conduct monetary
policy.
Although the fair value of security holdings can be
substantially greater than or less than the recorded
value at any point in time, these unrealized gains or

25

January 2010
Table 35. Federal Reserve Banks’ Combined Statement of Income and Comprehensive Income
Millions of dollars
January 1, 2009, to
September 30, 2009
Interest income:
Loans to depository institutions (refer to table 37) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other loans (refer to table 37) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
System Open Market Account (refer to table 36) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated variable interest entities (refer to table 38):
Investments held by consolidated variable interest entities:
Maiden Lane, Maiden Lane II, and Maiden Lane III LLCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial Paper Funding Facility LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense:
System Open Market Account (refer to table 36) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depository institution deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated variable interest entities (refer to table 38) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

889
2,261
31,131
4,668
3,962
42,911
86
1,496
200
1,782
41,129

Non-interest income (loss):
System Open Market Account—realized and unrealized losses, net (refer to table 36) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments held by consolidated variable interest entities gains (losses), net (refer to table 38):
Maiden Lane, Maiden Lane II, and Maiden Lane III LLCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial Paper Funding Facility LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan restructuring (refer to table 37)1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reimbursable services to government agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-interest (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,802)
8
(989)
517
299
25
(3,455)

Operating expenses:
Salaries and other beneﬁts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Occupancy expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assessments by the Board of Governors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional fees related to consolidated variable interest entities (refer to table 38) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,019
202
136
641
88
401
3,487

Net income prior to distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34,187

Change in funded status of beneﬁt plans2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income prior to distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution of comprehensive income: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid to member banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remaining amount to be distributed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Memo: Distributions to U.S. Treasury (interest on Federal Reserve notes)3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

297
34,484

487

1,049
33,435
26,977

Note: Unaudited.
1. In accordance with GAAP, as of June 30, 2009, the AIG revolving credit extension was reduced by a $1.4 billion adjustment for loan restructuring.
The adjustment is related to the loan modiﬁcation, announced on March 2, 2009, which eliminated the existing ﬂoor on the interest rate. The restructuring
adjustment is being recovered as it is amortized over the remaining term of the credit extension.
2. Represents the recognition of beneﬁt plan deferred actuarial gains and losses and prior service costs.
3. The Board of Governors requires each Reserve Bank to distribute any remaining net earnings to the U.S. Treasury as interest on Federal Reserve
notes, after providing for the payment of dividends and reservation of an amount necessary to equate surplus with capital paid-in. These distributions are
made weekly based on estimated net earnings for the preceding week. The amount of each Bank’s weekly distribution to the U.S. Treasury would be
affected by signiﬁcant losses and increases in capital paid-in at a Reserve Bank, which would require that the Reserve Bank retains net earnings until the
surplus is equal to the capital paid-in. The distributions to the U.S. Treasury are reported on an accrual basis; actual payments to the U.S. Treasury during
the period from January 1, 2009, through September 30, 2009, were $24,552 million.

losses have no effect on the ability of the Reserve
Banks to meet their ﬁnancial obligations and responsibilities. As of September 30, 2009, the fair value of the
U.S. government and agency securities held in the
SOMA, excluding accrued interest, was $980 billion,
the fair value of the agency-guaranteed MBS was
$703 billion, and the fair value of investments denominated in foreign currencies was $26 billion, as determined by reference to quoted prices for identical securities, except for MBS, for which market values are
obtained from an independent pricing vendor.

FRBNY conducts purchases and sales of U.S. government securities under authorization and direction
from the Federal Open Market Committee (FOMC).
The FRBNY buys and sells securities at market prices
from securities dealers and foreign and international
account holders. The FOMC has also authorized the
FRBNY to purchase and sell U.S. government securities under agreements to resell or repurchase such
securities (commonly referred to as repurchase and
reverse repurchase transactions).

26

Credit and Liquidity Programs and the Balance Sheet

Table 36. SOMA Financial Summary
Millions of dollars
January 1, 2009 − September 30, 2009
Average daily
balance1

Interest income
(expense)

Realized gains
(losses)

Unrealized
gains (losses)

Net earnings

SOMA assets
U.S. government securities2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal agency debt securities2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments denominated in foreign currencies4 . . . . . . . . . . . . . . . . . .
Central bank liquidity swaps5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities purchased under agreements to resell . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

592,742
73,655
352,202
24,505
230,113
5,128
1,278,345

16,202
1,241
11,351
231
2,093
13
31,131

—
—
(411)
—
—
—
(411)

—
—
—
898
—
—
898

16,202
1,241
10,940
1,129
2,093
13
31,618

SOMA liabilities
Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

69,928
1,208,417

(86)
31,045

—
(411)

—
898

(86)
31,532

Note: Unaudited. Components may not sum to totals because of rounding.
1. Based on holdings at opening of business.
2. Face value.
3. Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. Current face value of the securities, which is the remaining principal balance of the
underlying mortgages. Does not include unsettled transactions.
4. Includes accrued interest. Investments denominated in foreign currencies are revalued daily at market exchange rates.
5. Dollar value of foreign currency held under these agreements valued at the exchange rate to be used when the foreign currency is returned to the
foreign central bank. This exchange rate equals the market exchange rate used when the foreign currency was acquired from the foreign central bank.

The SOMA holds foreign currency deposits and foreign government debt instruments denominated in foreign currencies with foreign central banks and the
Bank for International Settlements. Central bank
liquidity swaps are the foreign currencies that the Federal Reserve acquires and records as an asset (excluding accrued interest) on the Federal Reserve’s balance
sheet. On January 5, 2009, the Federal Reserve began
purchasing MBS guaranteed by Fannie Mae, Freddie
Mac, and Ginnie Mae. Transactions in MBS are
recorded on settlement dates, which can extend several
months into the future. MBS dollar roll transactions,
which consist of a purchase of securities combined
with an agreement to sell securities in the future, may
generate realized gains and losses.

Loan Programs Financial Summary
Table 37 summarizes the average daily loan balances
and interest income of the Federal Reserve for the ﬁrst
three quarters of 2009. The most signiﬁcant loan balance is the TAF, which was established at the end of
2007. As noted earlier in this report, during 2008 the
Federal Reserve established several lending facilities
under authority of Section 13(3) of the Federal
Reserve Act. These included the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity
Facility (AMLF), the Primary Dealer Credit Facility
(PDCF), and credit extended to American International
Group, Inc. (AIG). Amounts funded by the Reserve
Banks under all these programs are recorded as loans

Table 37. Loan Programs Financial Summary
Millions of dollars
January 1, 2009 − September 30, 2009
Loan programs

Average daily
balance1

Primary, secondary, and seasonal credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Auction Facility (TAF) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans to depository institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46,864
351,661
398,525

176
713
889

Asset-Backed Commercial Paper Money Market Mutual Fund
Liquidity Facility (AMLF) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Primary Dealer Credit Facility (PDCF) and other broker-dealer credit .
Credit extended to American International Group, Inc. (AIG), net . . . . .
Term Asset-Backed Securities Loan Facility (TALF) . . . . . . . . . . . . . . . . . . .
Total loans to others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,315
10,167
41,753
16,011
78,246

72
37
1,938
214
2,261

—
—
(989)
—
(989)

72
37
949
214
1,272

476,771

3,150
—
3,150

(989)
—
(989)

2,161
—
2,161

Total loan programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loan programs, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

476,771

Interest income2

Provision for loan
restructuring
—
—
—

Total
176
713
889

Note: Unaudited. Components may not sum to totals because of rounding.
1. Based on holdings at opening of business. Average daily balance includes outstanding principal and capitalized interest net of unamortized deferred
commitment fees and allowance for loan restructuring, and excludes undrawn amounts and credit extended to consolidated LLCs.
2. Interest income includes the amortization of the deferred commitment and administrative fees.

27

January 2010
Table 38. Consolidated Variable Interest Entities Financial Summary
Millions of dollars
Item

CPFF

ML

ML II

ML III

Total Maiden
Lane LLCs

Net portfolio assets of the consolidated LLCs and the net position of
FRBNY and subordinated interest holders as of September 30, 2009
Net portfolio assets1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities of consolidated LLCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net portfolio assets available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

41,384
(360)
41,024

28,559
(2,418)
26,141

16,199
(2)
16,197

23,503
(3)
23,500

68,261
(2,423)
65,838

Loans extended to the consolidated LLCs by FRBNY2 . . . . . . . . . . . . . . . . . . .
Other beneﬁcial interests2,3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36,589
0
36,589

29,196
1,233
30,429

16,801
1,028
17,829

19,855
5,151
25,006

65,852
7,412
73,264

Allocated to FRBNY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allocated to other beneﬁcial interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative change in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,435
0
4,435

(3,055)
(1,233)
(4,288)

(604)
(1,028)
(1,632)

0
(1,506)
(1,506)

(3,659)
(3,767)
(7,426)

Summary of consolidated VIE net income for the current year through
September 30, 2009, including a reconciliation of total consolidated VIE
net income to the consolidated VIE net income recorded by FRBNY
Portfolio interest income4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense on loans extended by FRBNY5 . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense—other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio holdings gains (losses)6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) of consolidated LLCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,962
(587)
0
8
(27)
3,356

1,369
(109)
(45)
(881)
(31)
303

876
(187)
(26)
(955)
(9)
(301)

2,423
(236)
(129)
(1,346)
(21)
691

4,668
(532)
(200)
(3,182)
(61)
693

0
3,356

(45)
348

(26)
(275)

691
0

620
73

587
3,943

109
457

187
(88)

236
236

532
605

Cumulative change in net assets since the inception of the programs

Less: Net income (loss) allocated to other beneﬁcial interests6 . . . . . . . . . . . .
Net income (loss) allocated to FRBNY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: Interest expense on loans extended by FRBNY, eliminated in
consolidation5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) recorded by FRBNY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note: Unaudited. Components may not sum to totals because of rounding.
1. Commercial paper holdings are recorded at book value, which includes amortized cost and related fees. Maiden Lane, Maiden Lane II, and Maiden
Lane III holdings are recorded at fair value.
2. Includes accrued interest.
3. The other beneﬁcial interest holder related to Maiden Lane LLC is JPMC, and for Maiden Lane II and Maiden Lane III LLCs it is AIG.
4. Interest income is recorded when earned, and it includes amortization of premiums, accretion of discounts, and paydown gains and losses.
5. Interest expense recorded by each VIE on the loans extended by the FRBNY is eliminated when the VIEs are consolidated in the FRBNY’s ﬁnancial
statements and, as a result, the consolidated VIEs’ net income (loss) recorded by the FRBNY is increased by this amount.
6. The amount of Maiden Lane portfolio holdings losses allocated to FRBNY is $3,802 million, which is the total of portfolio holdings gains (losses)
reduced by the net income (loss) allocated to other beneﬁcial interests. This amount is reported as “Investments held by consolidated variable interest
entities gains (losses), net” in table 35.

by the Reserve Banks. Net earnings from these loan
programs were about $2.2 billion during the ﬁrst three
quarters of 2009. All loans must be fully collateralized
to the satisfaction of the lending Reserve Bank, with
an appropriate haircut applied to the collateral. At September 30, 2009, no loans were impaired, and an
allowance for loan losses was not required.

an estimate of the price that would be received upon
selling an asset if the transaction were to be conducted
in an orderly market on the measurement date. Consistent with generally accepted accounting principles, the
assets and liabilities of these LLCs have been consolidated with the assets and liabilities of the FRBNY. As
a consequence of the consolidation, the extensions of
credit from the FRBNY to the LLCs are eliminated.

Consolidated Variable Interest Entities (VIEs)
Financial Summary

“Net portfolio assets available” represent the net
assets available to beneﬁciaries of the consolidated
VIEs and for repayment of loans extended by the
FRBNY. “Net income (loss) allocated to FRBNY” represents the allocation of the change in net assets and
liabilities of the consolidated VIEs available for repayment of the loans extended by the FRBNY and other
beneﬁciaries of the consolidated VIEs. The differences
between the fair value of the net assets available and
the face value of the loans (including accrued interest)
are indicative of gains or losses that would have been
incurred by the beneﬁciaries if the assets had been
fully liquidated at prices equal to the fair value as of
September 30, 2009.

Table 38 summarizes the assets and liabilities of various consolidated VIEs previously discussed in this
report. It also summarizes the net position of senior
and subordinated interest holders and the allocation of
the change in net assets to interest holders. The
FRBNY is the sole beneﬁciary of the CPFF LLC and
the primary beneﬁciary of the Maiden Lane LLCs.
Commercial paper holdings are recorded at book value,
which includes amortized cost and related fees. Maiden
Lane LLC, Maiden Lane II LLC, and Maiden Lane III
LLC holdings are recorded at fair value, which reﬂects

28

Credit and Liquidity Programs and the Balance Sheet

Appendix
Additional Information Provided Pursuant to
Section 129 of the Emergency Economic
Stabilization Act of 2008

pledged collateral, and the risk of loss is mitigated by
daily revaluation of the collateral and haircuts on the
collateral value.

For the reasons discussed below, the Board does not
anticipate that the Federal Reserve or taxpayers will
incur any net loss on the loans provided by the Federal
Reserve under the TSLF, PDCF, CPFF, TALF, or the
AMLF, or the loans provided by the Federal Reserve
Bank of New York (FRBNY) to AIG or to Maiden
Lane LLC, Maiden Lane II LLC, or Maiden Lane III
LLC (collectively, the “Maiden Lane facilities”). In
making these assessments, the Board has considered,
among other things, the terms and conditions governing the relevant facility and the type, nature, and value
of the current collateral or other security arrangements
associated with the facility. As discussed earlier in this
report, the Federal Reserve has established various
terms and conditions governing the types of collateral
that may be pledged in support of a loan under a facility in order to mitigate the risk of loss. In the case of
the Maiden Lane facilities, the Board also has considered analyses of the projected returns on the portfolio
holdings of the respective special purpose vehicle
(SPV) (the assets of which serve as collateral for the
loan(s) extended to the SPV) conducted by the
FRBNY or its advisors in connection with the most
recent quarterly revaluation of the assets of each SPV.

Commercial Paper Funding Facility

Term Securities Lending Facility
As noted in the main portion of this report, no loans
currently are outstanding under the TSLF, and all prior
loans under the TSLF were repaid in full. The potential for losses on any new securities loans that may be
extended under the TSLF is mitigated by the quality of
the collateral accepted, haircuts on the value of the
collateral, daily revaluation of the collateral, and limits
on the participation of individual dealers. Moreover,
loans extended under this program are with recourse to
the borrower beyond the speciﬁc collateral pledged.

Primary Dealer Credit Facility
As noted in the main portion of this report, no loans
currently are outstanding under the PDCF, and all prior
loans under the PDCF were repaid in full. All credit
extended by the Federal Reserve under the PDCF is
with recourse to the broker-dealer entity beyond the

All advances by the FRBNY to the SPV established
under the CPFF are secured by all the assets of the
SPV. In addition, in situations where the obligations
acquired by the SPV are asset-backed commercial
paper (ABCP), the advances are further secured by the
assets that support the commercial paper. To use the
CPFF, each issuer also must pay a facility fee. Furthermore, each time an issuer sells commercial paper that
is not ABCP to the SPV, the issuer must pay a surcharge unless it has entered into a collateral arrangement for the commercial paper, or obtained an
endorsement or guarantee of its obligation on the commercial paper, that is acceptable to the FRBNY. All
fees are retained by the SPV and serve as additional
collateral for the FRBNY loans to provide an additional cushion against losses.

Term Asset-Backed Securities Loan Facility
Under TALF, the FRBNY makes loans on a collateralized basis to holders of eligible ABS and CMBS. The
potential for the Federal Reserve or taxpayers to incur
any net loss on the TALF loans extended by the
FRBNY to the holders of ABS and CMBS is mitigated
by the quality of the collateral, the risk assessment
performed by the FRBNY on all pledged collateral,
and the margin by which the value of the collateral
exceeds the amount of the loan (the haircut). Potential
losses to the Federal Reserve also are mitigated by the
portion of interest on TALF loans to borrowers transferred to TALF LLC and by $20 billion in credit protection provided by the Treasury under the Troubled
Asset Relief Program, both of which are available to
TALF LLC to purchase any collateral received by the
FRBNY from a borrower in lieu of repaying a TALF
loan or foreclosed upon due to a default by the
borrower.

Asset-Backed Commercial Paper Money Market
Mutual Fund Liquidity Facility
As noted in the main portion of this report, no loans
currently are outstanding under the AMLF, and all

29

January 2010

prior loans under the AMLF were repaid in full. Loans
extended under the AMLF are secured by ABCP that
receives the highest rating from a major credit rating
agency. Moreover, the ABCP is supported by the assets
backing the paper.

Loans to Maiden Lane LLC, Maiden Lane II
LLC, and Maiden Lane III LLC
The portfolio holdings of each of Maiden Lane LLC
(Maiden Lane), Maiden Lane II LLC (ML-II) and
Maiden Lane III LLC (ML-III) are revalued in accordance with generally accepted accounting principles
(GAAP) as of the end of each quarter to reﬂect an
estimate of the fair value of the assets on the measurement date. The fair value determined through these
revaluations may ﬂuctuate over time. In addition, the
fair value of the portfolio holdings that is reported on
the weekly H.4.1 statistical release reﬂects any accrued
interest earnings, principal repayments, expense payments and, to the extent any may have occurred since
the most recent measurement date, realized gains or
losses. The fair values as of December 30, 2009—as
shown in table 1 of this report, and reported in greater
detail in the H.4.1 release for that date—are based on
quarterly revaluations as of September 30, 2009.
Because the collateral assets for the loans to Maiden
Lane, ML-II, and ML-III are expected to generate cash
proceeds and may be sold over time or held to maturity, the current reported fair values of the net portfolio
holdings of Maiden Lane, ML-II, and ML-III do not
reﬂect the amount of aggregate proceeds that the Federal Reserve could receive from the assets of the
respective entity over the extended term of the loan to
the entity. The extended terms of the loans provide an
opportunity to dispose of the assets of each entity in
an orderly manner over time and to collect interest on
the assets held by the entity prior to their sale, other
disposition, or maturity. Each of the loans extended to
Maiden Lane, ML-II, and ML-III is current under the
terms of the relevant loan agreement.
In addition, JPMorgan Chase will absorb the ﬁrst
$1.15 billion of realized losses on the assets of Maiden
Lane, should any occur. Similarly, certain U.S. insur-

ance subsidiaries of AIG have a $1 billion subordinated position in ML-II and an AIG affiliate has a $5
billion subordinated position in ML-III, which are
available to absorb ﬁrst any loss that ultimately is
incurred by ML-II or ML-III, respectively. Moreover,
under the terms of the agreements, the FRBNY is
entitled to any residual cash ﬂow generated by the collateral assets held by Maiden Lane after the loans
made by the FRBNY and JPMorgan Chase are repaid,
and ﬁve-sixths and two-thirds of any residual cash
ﬂow generated by the assets held by ML-II and
ML-III, respectively, after the senior note of the
FRBNY and the subordinate positions of AIG affiliates
for these facilities are repaid.

Revolving Credit Facility for American
International Group, Inc.
In light of the extremely broad and diverse range of
collateral (including AIG’s ownership interest in
numerous nonpublic companies) and guarantees securing advances under the Revolving Credit Facility and
the term of the credit facility, it is difficult to estimate
with precision the aggregate value that ultimately will
or may be received in the future from the sale of collateral or the enforcement of guarantees supporting the
Revolving Credit Facility, and disclosure of any such
estimate could interfere with the goal of maximizing
value through the company’s global divestiture program and, consequently, diminish the proceeds available to repay the loan. However, based on the substantial assets and operations supporting repayment of the
loan, the capital and capital commitments provided to
AIG under the TARP, and the most recently completed
quarterly review of the security arrangements supporting the Revolving Credit Facility conducted as of September 30, 2009, by the FRBNY supported by analyses
performed by its advisors, the Federal Reserve anticipates that the loans provided by the Federal Reserve
under the Revolving Credit Facility, including interest
and commitment fees under the modiﬁed terms of the
facility, will be fully repaid and will not result in any
net loss to the Federal Reserve or taxpayers.
Full text of Federal Reserve System Monthly Report on Credit and Liquidity Programs and the Balance Sheet : January 2010

FRASER
