The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
June 2009 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 report as part of its efforts to enhance transparency in connection with its various programs to foster market liquidity and financial stability and to ensure appropriate accountability to the Congress and the public concerning policy actions taken to address the financial crisis. The report provides detailed information on the new policy tools that have been implemented since the summer of 2007.1 The Federal Reserve considers transparency about the goals, 1. 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. conduct, and stance of monetary policy to be fundamental to the effectiveness of monetary policy. The Federal Reserve Act sets forth the goals of monetary policy, specifically “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” Since the summer of 2007, the Federal Reserve has undertaken a number of important steps aimed at providing liquidity to important financial markets and institutions to support overall financial stability. Financial stability is a critical prerequisite for achieving sustainable economic growth, and all of the Federal Reserve’s actions during the crisis have been directed toward achieving its statutory monetary policy objectives. Contents Overview ................................................................................................................................................1 Recent Developments .............................................................................................................................1 System Open Market Account (SOMA) Portfolio .......................................................................................3 Recent Developments .............................................................................................................................3 Background ..........................................................................................................................................3 Liquidity Swaps ......................................................................................................................................4 Recent Developments .............................................................................................................................4 Background ..........................................................................................................................................4 Dollar Liquidity Swaps...........................................................................................................................4 Foreign-Currency Liquidity Swap Lines ....................................................................................................5 Lending to Depository Institutions ............................................................................................................5 Recent Developments .............................................................................................................................5 Background ..........................................................................................................................................5 Collateral Pledged by Depository Institutions.............................................................................................6 Recent Developments .............................................................................................................................6 Background ..........................................................................................................................................6 Collateral..............................................................................................................................................7 Lending to Primary Dealers .....................................................................................................................7 Recent Developments .............................................................................................................................7 Background ..........................................................................................................................................7 Collateral..............................................................................................................................................8 Other Lending Facilities: Commercial Paper Funding Facility (CPFF).........................................................9 Recent Developments .............................................................................................................................9 Background ..........................................................................................................................................9 Other Lending Facilities: Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF)...10 Recent Developments ...........................................................................................................................10 Background.........................................................................................................................................10 Collateral ............................................................................................................................................10 Other Lending Facilities: Term Asset-Backed Securities Loan Facility (TALF)............................................10 Recent Developments ...........................................................................................................................10 Background.........................................................................................................................................11 Collateral and Risk Management ............................................................................................................12 Lending in Support of Specific Institutions ..............................................................................................12 Recent Developments ...........................................................................................................................12 Background.........................................................................................................................................12 Bear Stearns........................................................................................................................................13 Financial Tables: Maiden Lane LLC ....................................................................................................13 American International Group (AIG) .......................................................................................................13 Recent Developments ........................................................................................................................13 Background .....................................................................................................................................14 Financial Tables: AIG Credit Facility ...................................................................................................15 Financial Tables: Maiden Lane II ........................................................................................................15 Financial Tables: Maiden Lane III LLC................................................................................................16 Citigroup ............................................................................................................................................16 Bank of America..................................................................................................................................16 Financial Tables: Federal Reserve System ................................................................................................17 Recent Developments ...........................................................................................................................17 Background.........................................................................................................................................17 Financial Tables ...................................................................................................................................18 SOMA Financial Summary.................................................................................................................18 Loan Programs .................................................................................................................................19 Consolidated Variable Interest Entities (VIEs) .......................................................................................19 Tables and Figures Tables 1. Selected Assets, Liabilities, and Capital Accounts of the Federal Reserve System ............................................1 2. System Open Market Account (SOMA) Holdings .......................................................................................3 3. Amounts Outstanding under Dollar Liquidity Swaps ...................................................................................4 4. Discount Window Credit Outstanding to Depository Institutions ...................................................................5 5. Discount Window Credit Outstanding to Depository Institutions—Concentration at Largest Borrowers ...............6 6. Lending to Depository Institutions: Collateral Pledged by Borrowers .............................................................6 7. Securities Pledged by Depository Institutions by Rating ..............................................................................7 8. Discount Window Credit Outstanding to Depository Institutions—Percent of Collateral Used ............................7 9. Credit Outstanding to Primary Dealers......................................................................................................7 10. Concentration of Borrowing at the PDCF and TSLF..................................................................................8 11. PDCF Collateral ..................................................................................................................................8 12. PDCF Collateral by Rating....................................................................................................................8 13. TSLF Collateral...................................................................................................................................8 14. TSLF Collateral by Rating ....................................................................................................................9 15. CPFF—Concentration of Largest Issuers .................................................................................................9 16. CPFF Commercial Paper Holdings by Type .............................................................................................9 17. CPFF Collateral by Rating ....................................................................................................................9 18. AMLF Credit: Number of Borrowers and Amount Outstanding ...................................................................9 19. AMLF Collateral by Rating .................................................................................................................10 20. TALF: Number of Borrowers and Loans Outstanding ..............................................................................10 21. TALF Collateral by Underlying Credit Exposure .....................................................................................11 22. TALF Collateral by Rating ..................................................................................................................11 23. Issuers of Securities that Collateralize TALF Loans .................................................................................12 24. Fair Value Asset Coverage ...................................................................................................................12 25. Outstanding Principal Balance of Loans.................................................................................................13 26. Summary of Portfolio Composition, Cash/Cash Equivalents, and Other Assets and Liabilities ........................13 27. Maiden Lane LLC Asset Distribution by Type and Rating ........................................................................13 28. AIG Revolving Credit Facility..............................................................................................................15 29. Maiden Lane II LLC Outstanding Principal Balance of Senior Loan and Fixed Deferred Purchase Price..........16 30. Maiden Lane II LLC Summary of Portfolio Composition and Cash/Cash Equivalents ...................................16 31. Maiden Lane II LLC Asset Distribution by Sector and Rating...................................................................16 32. Maiden Lane III LLC Outstanding Principal Balance of Senior Loan and Equity Contribution .......................17 33. Maiden Lane III LLC Summary of Portfolio Composition and Cash/Cash Equivalents ..................................17 34. Maiden Lane III LLC Asset Distribution by CDO Type/Vintage and Rating ................................................18 35. SOMA Financial Summary ..................................................................................................................19 36. Interest Income—Loan Programs ..........................................................................................................19 37. Assets and Liabilities of Consolidated Variable Interest Entities .................................................................20 Figures 1. Credit and Liquidity Programs and the Federal Reserve’s Balance Sheet ........................................................2 2. Maiden Lane Portfolio Distribution.........................................................................................................14 3. AIG Revolving Credit...........................................................................................................................15 4. Maiden Lane II LLC Portfolio Distribution ..............................................................................................17 5. Maiden Lane III LLC Portfolio Distribution.............................................................................................18 1 Credit and Liquidity Programs and the Balance Sheet funding are now less expensive in many cases than funding obtained through these facilities. Overview Recent Developments • Improvements in financial market conditions over recent weeks, particularly following release of the results of the Supervisory Capital Assessment Program, have been accompanied by a drop in credit extended through many of the Federal Reserve’s liquidity programs. • Declines in borrowing under the Primary Dealer Credit Facility (PDCF) and Term Securities Lending Facility (TSLF) have been particularly notable. Market reports have suggested that market sources of • The Federal Reserve has continued to purchase large volumes of Treasury and agency securities and agency-backed mortgage-backed securities (MBS) under its large-scale asset purchase programs. • In recent weeks, the level of reserve balances has remained quite high; the drain in reserves attributable to a drop in use of various lending programs has been roughly offset by increases in reserves associated with asset purchases. • Recent quarterly revaluations resulted in markdowns in the aggregate fair value of assets held by Maiden Table 1. Selected Assets, Liabilities, and Capital Accounts of the Federal Reserve System ($ billions) Current May 27, 2009 Change from Apr 29, 2009 Change from May 28, 2008 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selected assets: Securities held outright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. Treasury securities1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Agency securities1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . MBS2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Memo: TSLF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,082 +13 +1,176 1,107 600 80 428 27 +124 +51 +12 +62 −6 +616 +109 +80 +428 −79 Lending to depository and other financial institutions . . . . . . . . . . . . . . . . . . . . . . Primary, secondary, and seasonal credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TAF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PDCF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AMLF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 437 38 373 0 26 −16 −7 −31 −1 +22 +258 +19 +223 −10 +26 Foreign central bank liquidity swaps3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 −68 +120 Lending through other credit facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CPFF4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TALF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 149 15 −23 −33 +9 +165 +149 +15 Support for specific institutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Credit extended to AIG5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net portfolio holdings of Maiden Lane I, II, and III6 . . . . . . . . . . . . . . . . . . . . 106 44 62 −12 −1 −10 +106 +44 +62 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,037 +15 +1,171 870 877 11 200 0 +7 +64 −52 0 −1 +82 +850 +7 +200 0 Total capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 −2 +4 Item Note: Unaudited. Securities loans under the TSLF are off-balance-sheet transactions. TSLF loans are shown here as a memo item to indicate the portion of securities held outright that have been lent through this program. Components may not add because of rounding. 1. Face value. 2. Current face value which is the remaining principal balance of the underlying mortgages. 3. 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. 4. Book value of net portfolio holdings, includes commercial paper holdings, net, and about $4 billion of other investments. 5. Excludes credit extended to Maiden Lane II and III. 6. Fair value. 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. 2 Credit and Liquidity Programs and the Balance Sheet Figure 1. Credit and Liquidity Programs and the Federal Reserve’s Balance Sheet Selected Assets of the Federal Reserve Billions of dollars Securities Held Outright 2500 Weekly Total Assets Securities Held Outright All Liquidity Facilities* + Billions of dollars 1000 Weekly U.S. Treasury Securities Federal Agency Debt Securities Mortgage-Backed Securities 800 2000 + 600 1500 + + 400 1000 + 200 500 + 0 0 -200 2007 2008 2009 2007 2008 2009 Note: Reflects settlements not commitments. Credit Extended through Federal Reserve Liquidity Facilities Billions of dollars Selected Liabilities of the Federal Reserve Billions of dollars 2000 Weekly All Liquidity Facilities* Term Auction Credit Commercial Paper Funding Facility Central Bank Liquidity Swaps Term Asset-Backed Securities Loan Facility 1200 Weekly Currency in Circulation Deposits of Depository Institutions Treasury Balance 1000 + + 1500 800 600 1000 + 400 + 500 200 + + + + 2007 2008 2009 0 0 2007 2008 2009 + indicates most recent data point. Data are shown through 5/27/2009. *All Liquidity Facilities includes: Term Auction credit; primary credit; secondary credit; seasonal credit; Primary Dealer Credit Facility; Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility; Term Asset-Backed Securities Loan Facility; Commercial Paper Funding Facility; and central bank liquidity swaps. 3 June 2009 Lane LLC, Maiden Lane II LLC, and Maiden Lane III LLC (see “Lending in Support of Specific Institutions” on page 12). • The Federal Reserve released audited financial statements for 2008 that received unqualified audit opinions from independent registered public accountants for all Reserve Banks and limited liability company (LLC) entities (see “Financial Tables: Federal Reserve System” on page 17). • Investor interest in financing through the Term AssetBacked Securities Loan Facility (TALF) has increased over recent weeks. The Federal Reserve has announced the addition of new asset classes that are eligible for TALF financing and has extended the maximum term of loans available for certain classes of asset-backed securities (ABS). • Developments concerning American International Group, Inc. (AIG) included the firm’s announcement of plans to separate its American International Underwriters (AIU) Holdings group in a special-purpose vehicle, a modification of its credit arrangement with the Federal Reserve, and the resignation of its chief executive officer pending the appointment of a successor. System Open Market Account (SOMA) Portfolio Recent Developments • The SOMA portfolio expanded rapidly over recent weeks, reflecting Federal Reserve purchases of securities under the large-scale asset purchase programs (LSAPs) announced by the Federal Open Market Committee (FOMC). • The FOMC has authorized purchases of up to $1.25 trillion of agency MBS and up to $200 billion of agency direct obligations by the end of this year. • The FOMC has authorized purchases of up to $300 billion of Treasury securities by the autumn of this year. • As of May 27, the Federal Reserve had settled purchases of about $125 billion in Treasury securities, $80 billion in agency debt, and $428 billion in agency-backed MBS as part of the FOMC’s largescale asset purchase programs. The settled purchases to date have increased the size of the SOMA portfolio to about twice the level prevailing in August of 2008. • So far, about 80 percent of the Treasury purchases have been in the 2- to 10-year maturity range and 10 percent in maturities greater than 10 years. The remainder of the purchases has been in Treasury Inflation-Protected Securities (TIPS) and securities maturing in less than two years. Table 2. System Open Market Account (SOMA) Holdings As of May 27, 2009 Security type Total par value ($ billions) U.S. Treasury bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. Treasury notes and bonds . . . . . . . . . . . . . . . . . . . . . . . . Treasury Inflation-Protected Securities1 . . . . . . . . . . . . . . . . Federal agency securities2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mortgage-backed securities3 . . . . . . . . . . . . . . . . . . . . . . . . . . . Total SOMA holdings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 534 43 80 428 1,103 Note: Unaudited. 1. Does not reflect inflation compensation of about $5 billion. 2. Direct obligations of Fannie Mae, Freddie Mac, and Federal Home Loan Bank. 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. 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 Federal Reserve Bank of New York (FRBNY) 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 found in 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 System Open Market Account, the Federal Reserve’s portfolio. Permanent OMOs are generally used to accommodate the longerterm factors driving the expansion of the Federal Reserve’s balance sheet, principally the trend growth of currency in circulation. Temporary OMOs are typically 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. A repo is the economic equivalent of a collateralized loan, in which the difference between the purchase and sale prices reflects the interest on the loan. Each OMO affects the Federal Reserve’s balance sheet; the size and nature of the effect depends 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 Condition Statement of Federal Reserve Banks.” The release separately 4 Credit and Liquidity Programs and the Balance Sheet reports securities held outright, repos, and reverse repos (www.federalreserve.gov/releases/h41/). Background The Federal Reserve’s approach to the implementation of monetary policy has evolved considerably since 2007, and particularly so 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, open market operations 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 Federal Reserve determined that supporting the mortgage-backed security “dollar roll” market promotes the goals of the mortgage-backed securities purchase program. Dollar roll transactions, which consist of a purchase of securities combined with an agreement to sell securities in the future, provide short-term financing to the mortgage-backed securities market. Because of principal and interest payments and occasional delays in the settlement of transactions, the Federal Reserve also has some uninvested cash associated with the mortgagebacked securities purchase program. The Federal Reserve’s outright holdings of mortgage-backed securities are reported in tables 1, 3, 9, and 10 of the H.4.1 statistical release. 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 has 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. In March 2009, the FOMC announced that it would also purchase up to $300 billion of longer-term Treasury securities over the next 6 months to help improve conditions in private credit markets. The Federal Reserve has purchased a range of securities across the maturity spectrum, including TIPS. The bulk of purchases have been in intermediate maturities. The Federal Reserve conducts purchases through regular auctions, with the auction results posted to the FRBNY website at www. newyorkfed.org/markets/openmarket.html. Liquidity Swaps Recent Developments • Use of the Federal Reserve’s foreign central bank dollar liquidity swaps has declined noticeably in recent weeks, consistent with a general improvement of conditions in short-term funding markets. • As of May 27, total dollar liquidity extended to foreign central banks dropped to $182 billion. The FRBNY operates swap lines under the authority in section 14 of the Federal Reserve Act and in compliance with authorizations, policies, and procedures established by the FOMC. Dollar Liquidity Swaps On December 12, 2007, the FOMC announced that it had authorized dollar liquidity swap lines with the European Central Bank and the Swiss National Bank to provide liquidity in U.S. dollars to overseas markets. Subsequently, the FOMC authorized dollar liquidity swap lines with additional central banks. These lines are now authorized with the following institutions: the Reserve Bank of Australia, the Banco Central do Brasil, the Bank of Canada, Danmarks Nationalbank, the Bank of England, the European Central Bank, the Bank of Japan, the Bank of Korea, the Banco de Mexico, the Reserve Bank of New Zealand, the Norges Bank, the Monetary Authority of Singapore, Sveriges Riksbank, and the Swiss National Bank. The FOMC has authorized these lines through October 30, 2009. Swaps under these lines consist of two transactions. When a foreign central bank (FCB) draws on its swap line with the FRBNY, the FCB sells a specified amount of its currency to the FRBNY in exchange for dollars Table 3. Amounts Outstanding under Dollar Liquidity Swaps Central bank Amount ($ billions) 5/27/2009 Amount ($ billions) 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 3 101 9 25 2 5 2 17 5 0 13 0 0 182 0 0 291 25 123 33 15 23 25 8 0 10 0 0 554 Note: Unaudited. Components may not add because of rounding. 5 June 2009 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 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 pays interest at a market-based rate to the FRBNY. 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, 9, and 10 of the 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 remaining maturity of 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). The FOMC has authorized these liquidity swap lines through Octo- Table 4. Discount Window Credit Outstanding to Depository Institutions Daily average borrowing for each class of borrower over the four weeks ending May 27, 2009 Type and size of borrower Commercial banks2 . . . . . . . . . . . . . . . . . . . . . . . . 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)3 27 62 146 95 47 378 257 159 21 1 10 448 Note: Includes primary, secondary, seasonal, and Term Auction Facility credit. Size categories based on total domestic assets as of December 31, 2008. Components may not sum to total because of rounding. 1. Average daily number of depository institutions with credit outstanding. Over this period, a total of 566 institutions borrowed. 2. Includes branches and agencies of foreign banks. 3. Average daily borrowing by all depositories in each category. ber 30, 2009. So far, the Federal Reserve has not drawn on these swap lines. Lending to Depository Institutions Recent Developments • Credit provided to depository institutions through the discount window and the Term Auction Facility (TAF) has declined of late, primarily reflecting reductions in loans outstanding under the TAF. • Recent TAF auctions have been undersubscribed, and as a result the auction rate has been equal to the minimum bid rate of 25 basis points for some time. 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 time of need. Much of the statutory framework that governs lending to depository institutions is contained in section 10B of the Federal Reserve Act, as amended. The general policies that govern discount window lending are set forth in the 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. In December 2007, the Federal Reserve introduced the TAF, which provides 6 Credit and Liquidity Programs and the Balance Sheet Table 5. Discount Window Credit Outstanding to Depository Institutions—Concentration at Largest Borrowers For the four weeks ending May 27, 2009 Ranking Rank by amount of borrowing Top five . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Next five . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Number of borrowers Daily average borrowing ($ billions) 5 5 368 378 158 67 228 448 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 Pledged by Depository Institutions Note: 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 total because of rounding. credit to depository institutions in generally sound financial condition through an auction mechanism. 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. 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-than-acceptable 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 supervisor, including CAMELS ratings,1 to identify potentially problematic institutions and classify them according to the severity of the risk they pose to the Federal Reserve. Having identified institutions that pose a higher 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. Recent Developments • Total collateral pledged by borrowing depository institutions exceeded $1 trillion as of May 27, more than twice the amount of credit outstanding. • The Federal Reserve announced updates to collateral valuations in early April and implemented the updates at the end of April. These changes reduced the lendable value of collateral in aggregate by about 10 percent. Background All extensions of 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 Table 6. Lending to Depository Institutions: Collateral Pledged by Borrowers As of May 27, 2009 Type of collateral Loans Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Residential mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities US Treasury/agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Municipal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate market instruments . . . . . . . . . . . . . . . . . . . . . . . MBS/CMO: Agency-backed . . . . . . . . . . . . . . . . . . . . . . . . . MBS/CMO: Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Asset-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International (sovereign, agency, municipal, and corporate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lendable value ($ billions) 279 94 93 73 19 34 54 60 36 173 51 965 Note: 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 $411 billion. The lendable value of collateral pledged by all depository institutions, including those without any outstanding loans, was $1,504 billion. Lendable value is value after application of appropriate haircuts. Components may not sum to total because of rounding. 7 June 2009 Table 7. Securities Pledged by Depository Institutions by Rating As of May 27, 2009 Lendable value ($ billions) Type of security and rating U.S. Treasury, Agency and agency-backed securities. . . Other securities AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Aa/AA1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Baa/BBB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investment-grade3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 215 51 67 29 131 618 Note: 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+ rating or MIG1 or SP-1+ municipal bond rating. 2. Includes short-term securities with A-1 rating or SP-1 municipal bond rating. 3. Determined based on credit review by Reserve Bank. 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. Borrowers may be required to pledge additional collateral if their financial condition weakens. Collateral 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). 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. Institutions may not pledge as Table 8. Discount Window Credit Outstanding to Depository Institutions—Percent of Collateral Used As of May 27, 2009 collateral any instruments that they or their 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. Collateral As shown in Table 8, most depository institutions that borrow from the Federal Reserve maintain collateral well in excess of their current borrowing levels. Lending to Primary Dealers Recent Developments • Borrowing at the Primary Dealer Credit Facility (PDCF) and Term Securities Lending Facility (TSLF) has declined substantially over recent weeks as conditions in money markets reportedly have improved. 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 investment-grade securities. On September 14, 2008, the eligible set of 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, the Federal Reserve Board authorized the extension of credit to a set of other securities dealers on terms very similar to those for the PDCF. Credit extended under either program is reported in table 1 of the H.4.1 statistical release as Table 9. Credit Outstanding to Primary Dealers 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 89 118 48 14 382 47 114 184 63 2 411 Note: Components may not add to total because of rounding. As of May 27, 2009 Number of borrowers Borrowing under primary dealer credit facility (PDCF) ($ billions) Borrowing under term securities lending facility (TSLF) ($ billions) 4 0 27 Note: Borrowing figures represent total amounts of PDCF and TSLF credit extended on May 27, 2009. The total reported for the TSLF represents the par value of securities lent. 8 Credit and Liquidity Programs and the Balance Sheet Table 10. Concentration of Borrowing at the PDCF and TSLF Table 12. PDCF Collateral by Rating As of May 27, 2009 As of May 27, 2009 Rank by amount of borrowing Top five . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Next five . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Number of borrowers Daily average borrowing ($ billions) 4 NA NA 4 27 NA NA 27 NA - Not applicable “Primary dealer and other broker-dealer credit,” and is included in “Other loans” in tables 9 and 10 of the H.4.1 release. On March 11, 2008, the Federal Reserve announced the creation of the TSLF. Under the TSLF, the 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 mortgage-backed securities. 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 the primary dealers to draw upon short-term, fixed-rate TSLF loans from the SOMA portfolio, in exchange for program-eligible collateral. The TOP program is intended to enhance the effectiveness of the TSLF by offering added liquidity during periods of heightened collateral market pressures, such as quarterend dates. The TSLF and TOP programs support the liquidity of primary dealers and foster improved conditions in financial markets more generally. Securities lent through these programs are reported in table 1A of the H.4.1 statistical release. Table 11. PDCF Collateral As of May 27, 2009 Type of collateral Securities U.S. Treasury/agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Municipal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate market instruments . . . . . . . . . . . . . . . . . . . . . . . MBS/CMO: agency-backed. . . . . . . . . . . . . . . . . . . . . . . . . . MBS/CMO: other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Asset-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International (sovereign, agency, and corporate) . . . . . Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lendable value ($ billions) Type of collateral 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lendable value ($ billions) 0 0 0 0 0 0 0 0 0 0 0 Note: Collateral pledged by borrowers of PDCF and related credit to primary dealers as of the date shown. Credit on that date totaled $0 billion. Lendable value is value after application of appropriate haircuts. Components may not sum to total because of rounding. 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 that are particularly sought after. Amounts outstanding under that program are, generally, fairly modest, and these are also reported in table 1A of the H.4.1 statistical release. 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 FRBNY. The collateral is valued by the clearing banks; values are based on prices reported by a number of private-sector pricing services that are widely used by market participants. Loans made under the PDCF are made with recourse beyond the collateral provided by the primary dealer entity itself. Transactions under the TSLF involve lending securities rather than cash; a dealer borrows Treasury securities from the Federal Reserve and provides another seTable 13. TSLF Collateral As of May 27, 2009 0 0 0 0 0 0 0 0 0 0 0 Note: Collateral pledged by borrowers of PDCF and related credit to primary dealers as of the date shown. Credit on that date totaled $0 billion. Lendable value is value after application of appropriate haircuts. Components may not sum to total because of rounding. Type of collateral Securities U.S. Treasury/agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Municipal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . MBS/CMO: agency-backed. . . . . . . . . . . . . . . . . . . . . . . . . . MBS/CMO: other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Asset-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lendable value ($ billions) 3 2 9 9 5 3 31 Note: Collateral pledged by borrowers of TSLF as of the date shown. Borrowing on the date shown was $27 billion. Lendable value is value after application of appropriate haircuts. Components may not sum to total because of rounding. 9 June 2009 Table 14. TSLF Collateral by Rating Table 16. CPFF Commercial Paper Holdings by Type As of May 27, 2009 As of May 27, 2009 Lendable value ($ billions) Type of collateral U.S. Treasury, agency, and agency-backed securities . . Other securities Aaa/AAA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Aa/AA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A/A-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Baa/BBB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 6 1 7 4 31 Note: Collateral pledged by borrowers of TSLF on the date shown. Borrowing on that date was $27 billion. Lendable value is value after application of appropriate haircuts. TSLF collateral must be investment-grade. Components may not sum to total because of rounding. Type of commercial paper Value ($ billions) Unsecured commercial paper Issued by financial firms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issued by nonfinancial firms . . . . . . . . . . . . . . . . . . . . . . . . . Asset-backed commercial paper. . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 * 94 147 Note: Components may not sum to total because of rounding; does not include $4 billion in accumulated earnings invested in other liquid assets. * denotes less than $500 million. Table 17. CPFF Collateral by Rating As of May 27, 2009 curity as collateral. Eligible collateral is determined by the Federal Reserve. Currently, two schedules of collateral are accepted. Schedule 1 collateral is Treasury, agency, and agency-guaranteed mortgage-backed securities. Schedule 2 collateral is investment-grade corporate, municipal, mortgage-backed, and asset-backed securities, as well as Schedule 1 collateral. Haircuts on posted collateral are determined by FRBNY using methods consistent with current market practices. Other Lending Facilities: Commercial Paper Funding Facility (CPFF) Recent Developments • A significant portion of maturing paper in the CPFF over recent weeks has not been rolled over. • Improvements in market conditions may have allowed some borrowers to obtain financing from private investors in the commercial paper market or from other sources. Background The CPFF is a facility, authorized under section 13(3) of the Federal Reserve Act, that supports liquidity in the commercial paper markets. The CPFF provides a liquidity backstop to U.S. issuers of commercial paper through a specially created limited liability company Type of collateral Value ($ billions) 1 Commercial paper with rating A-1/P-1/F-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Split-rated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Downgraded after purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 3 * 147 Note: Components may not sum to total because of rounding; does not include $4 billion of other investments. 1. The CPFF purchases only U.S. dollar-denominated commercial paper (including asset-backed commercial paper (ABCP)) that is rated at least A-1/P-1/F-1 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/F-1 by two or more. “Split-rated” is acceptable commercial paper that has received an A-1/P-1/F-1 rating from two rating organizations and a lower rating from a third rating organization. Some pledged commercial paper was downgraded below split-rated after purchase; the facility holds such paper to maturity. * denotes less than $500 million. (LLC) called the CPFF LLC. This LLC purchases three-month unsecured and asset-backed commercial paper directly from eligible issuers. The FRBNY provides financing to the LLC, and the FRBNY’s loan to the LLC is secured by all of the assets of the LLC, including those purchased with the cumulated upfront fees paid by the issuers. The CPFF was announced on October 7, 2008 and is administered by FRBNY, and the assets and liabilities of the LLC are consolidated onto the balance sheet of the FRBNY. The net assets of the LLC are shown in tables 1, 9, and 10 of the H.4.1 statistical release, and primary accounts of the LLC are presented in table 7 of the H.4.1. The Federal Reserve Board has authorized the extension of credit from the CPFF through October 30, 2009. Table 15. CPFF— Concentration of Largest Issuers For the four weeks ending May 27, 2009 Rank Rank by amount of commercial paper (CP) Top five issuers . . . . . . . . . . . . . . . . . . . . . . . . . . Next five issuers . . . . . . . . . . . . . . . . . . . . . . . . . Other issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Number of borrowers Daily average borrowing ($ billions) 5 5 47 57 57 29 73 159 Note: Amount of commercial paper held in the CPFF that was issued by the top five and the next five issuers on each day. Components may not sum to total because of rounding. Table 18. AMLF Credit: Number of Borrowers and Amount Outstanding Daily average for the four weeks ending May 27, 2009 Lending program Asset-Backed Commercial Paper Lending Facility (AMLF) . . . . . . . . . . . . . . . . . . . . . . . . . * Three or fewer borrowers. Number of institutions Borrowing ($ billions) * 26 10 Credit and Liquidity Programs and the Balance Sheet Other Lending Facilities: Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF) Recent Developments • The amount outstanding under the AMLF has generally declined over recent weeks in concert with the overall improvement in funding markets. • The amount borrowed under the AMLF, however, jumped in the week prior to the release of the results from the Supervisory Capital Assessment Program. Background The AMLF is a lending facility that finances the purchases of high-quality asset-backed commercial paper (ABCP) from money market mutual funds by U.S. depository institutions and bank holding companies. The program is intended to assist money funds that hold such paper to meet the demands for redemptions by investors and to foster liquidity in the 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 only to the collateral securing the loan if the borrower elects not to repay. 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 H.4.1 statistical release and is included in “Other loans” in tables 9 and 10 of the H.4.1. The Federal Reserve Board has authorized extension of credit through the AMLF until October 30, 2009. Collateral Collateral eligible for the AMLF is limited to ABCP that: Table 19. AMLF Collateral by Rating As of May 27, 2009 Type of collateral Value ($ billions) Asset-backed commercial paper with rating A-1/P-1/F-1 and not on watch for downgrade . . . . . . . A-1/P-1/F-1 but on watch for downgrade1 . . . . . . . . . . . Below A-1/P-1/F-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 1 * 26 Note: 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, F-1, or P-1 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 rated A-1/P-1/F-1 is ABCP that has deteriorated after it was pledged. * denotes amounts less than $500 million. • was purchased by the borrower on or after September 19, 2008, from a registered investment company that holds itself out as a money market mutual fund; • 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; • is not rated lower than A1, P1, or F1 at the time it is pledged to the Federal Reserve Bank of Boston (this would exclude paper that is rated A1/P1/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. Other Lending Facilities: Term Asset-Backed Securities Loan Facility (TALF) Recent Developments • Investor interest in TALF financing has increased recently. • May subscriptions supported primary issuance of eight ABS deals worth a total of about $13.6 billion, of which $10.6 billion was financed through the TALF. • The Federal Reserve recently announced a number of enhancements to the TALF program, including the introduction of new interest rate schedules applicable to borrowings against certain ABS with relatively short maturities, additions to the list of TALF-eligible securities, including commercial mortgage-backed securiTable 20. TALF: Number of Borrowers and Loans Outstanding As of May 27, 2009 Lending program Number of borrowers Borrowing ($ billions) Term Asset-Backed Securities Loan Facility (TALF) . . . . . . . . . . . . . . . . . . . . . . . . . . 61 15 11 June 2009 ties (CMBS) and securities backed by insurance premium finance loans, and the authorization of fiveyear loans for certain classes of securities. • Most recently, the Federal Reserve announced the inclusion of “legacy” CMBS—previously issued CMBS—to the list of TALF-eligible securities. • June 2009 subscriptions supported primary issuance of 13 ABS deals worth a total of about $16.4 billion, of which approximately $11 billion was financed through the TALF. Background On November 25, 2008, the Federal Reserve announced the creation of the TALF under section 13(3) of the Federal Reserve Act. The TALF is a funding facility under which the FRBNY extends credit with a term of up to five years to holders of eligible assetbacked securities (ABS). The TALF is intended to assist financial markets in accommodating the credit needs of consumers and businesses of all sizes by facilitating the issuance of ABS collateralized by a variety of consumer and business loans; it is also intended to improve the market conditions for ABS more generally. Eligible collateral initially included U.S. dollardenominated ABS that (1) are backed by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration (SBA) and (2) have a credit rating in the highest investment-grade rating category from two or more approved rating agencies and do not have a credit rating below the highest investment-grade rating category from a major rating agency. The loans provided through the TALF are nonrecourse loans; the Federal Reserve has rights only to the collateral securing the loan in the event that the borrower elects not to repay. Borrowers commit their own risk capital in the form of “haircuts” against the collateral, which serve as the borrower’s equity in the transaction and act as a buffer for absorbing any decline in the collateral’s value in the event the loan is Table 21. TALF Collateral by Underlying Credit Exposure As of May 27, 2009 Type of collateral Value ($ billions) Asset-backed securities by underlying loan type Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Floorplan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Small business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Student loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 10 * 0 * 3 17 Note: Components may not sum to total because of rounding. Data represent the face value of collateral. * denotes less than $500 million. Table 22. TALF Collateral by Rating As of May 27, 2009 Type of collateral Value ($ billions) Asset-backed securities with rating AAA/Aaa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 17 Note: Components may not sum to total because of rounding. 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). The loan from the FRBNY is senior to the TARP funds. Thus, the TARP funds serve as a “first loss” position in the disposition special-purpose vehicle in the event the borrower’s haircut does not fully absorb the decline in the collateral’s value. 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 asset-backed securities, such as ABS backed by commercial mortgages or private-label (non-agency) ABS backed by residential mortgages. Any expansion of the TALF would be supported by the Treasury providing additional funds from the TARP. On March 19, the Federal Reserve Board announced that starting in April, the set of eligible collateral for TALF loans was being expanded to include ABS backed by loans or leases related to business equipment, leases of vehicle fleets, floorplan loans, and mortgage servicing advances. On March 23, the Federal Reserve and the Treasury announced that they were planning on expanding the list of eligible collateral for TALF loans to include previously issued securities—so-called “legacy securities”—as a complement to the Treasury’s Public Private Investment Program. Eligible securities are expected to include certain non-agency residential mortgage-backed securities (RMBS) that were originally rated AAA when issued and outstanding commercial mortgage-backed securities and ABS that are rated AAA. On May 1, the Federal Reserve announced that, starting in June 2009, newly issued CMBS and securities backed by insurance premium finance loans would be eligible collateral under the TALF. The Federal Reserve also authorized TALF loans with maturities of five years, available for the June funding, to finance purchases of CMBS, ABS backed by student loans, and ABS backed by loans guaranteed by the Small Business Administration. The Federal Reserve indicated that up to $100 billion of TALF loans could have five-year maturities and that some of the interest on collateral financed with a five-year loan may be diverted toward an 12 Credit and Liquidity Programs and the Balance Sheet Table 23. Issuers of Securities that Collateralize Outstanding TALF Loans As of May 27, 2009 Issuers Cabela’s Credit Card Master Note Trust CarMax Auto Owner Trust 2009-1 Chase Issuance Trust Citibank Credit Card Issuance Trust CNH Equipment Trust 2009-B Ford Credit Auto Owner Trust GE Capital Credit Card Master Note Trust Harley-Davidson Motorcycle Trust 2009-1 Honda Auto Receivables 2009-2 Owner Trust Huntington Auto Trust 2009-1 MMCA Auto Owner Trust 2009-A Nissan Auto Receivables 2009-A Owner Trust SLM Private Education Loan Trust 2009-B Small Business Administration Participation Certificates Volkswagen Auto Lease Trust 2009-A World Financial Network Credit Card Master Note Trust World Omni Auto Receivables Trust 2009-A accelerated repayment of the loan, especially in the fourth and fifth years. On May 19, the Federal Reserve announced that, starting in July 2009, certain high-quality CMBS issued before January 1, 2009 (legacy CMBS) would become eligible collateral under the TALF. The Federal Reserve indicated that eligible newly issued and legacy CMBS must have at least two AAA ratings from a list of approved ratings agencies—DBRS, Fitch, Moody’s Investors Service, Realpoint, or Standard & Poor’s—and must not have a rating below AAA from any of these rating agencies. More broadly, the Federal Reserve announced that it was formalizing procedures for determining the set of rating agencies whose ratings would be accepted for various types of eligible collateral in the Federal Reserve’s credit programs. Collateral and Risk Management Under the TALF, the FRBNY lends on a non-recourse basis to holders of certain asset-backed securities (ABS) backed by consumer, business, and commercial mortgage loans. Eligible collateral for the TALF includes U.S. dollar-denominated ABS that (1) have a long-term credit rating in the highest investment-grade rating category (for example, AAA) from two or more rating agencies and (2) do not have a long-term credit rating below the highest investment-grade rating category from a single rating agency. Eligible smallbusiness-loan ABS also includes U.S. dollardenominated cash ABS for which 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 under- lying 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, floor plan loans, mortgage servicing advances, insurance premium finance loans, commercial mortgages, and loans guaranteed by the SBA. Except for ABS for which the underlying credit exposures are SBAguaranteed 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 will be secured by the ABS collateral, with the FRBNY lending an amount equal to the market value of the ABS less a “haircut.” 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. In addition, the U.S. Treasury Department—under the Troubled Assets Relief Program (TARP) of the Emergency Economic Stabilization Act of 2008—will provide $20 billion of credit protection to the FRBNY in connection with the TALF. Lending in Support of Specific Institutions Recent Developments • Recent quarterly revaluations resulted in a reduction to the fair value asset coverage of FRBNY loans to Maiden Lane LLC, Maiden Lane II LLC, and Maiden Lane III LLC, as presented in Table 24. Background In the current financial crisis, the Federal Reserve has extended credit to certain specific institutions in order to avert disorderly failures that could result in severe Table 24. Fair Value Asset Coverage (in millions) Maiden Lane LLC . . . . . . . . . . . Maiden Lane II LLC . . . . . . . . . Maiden Lane III LLC . . . . . . . . Fair value asset coverage of FRBNY loan on 3/31/2009 Fair value asset coverage of FRBNY loan 12/31/2008 (3,771) (1,965) (3,441) (3,403) (329) 2,824 Note: Unaudited. Fair value asset coverage is the amount by which the fair value of the net portfolio assets of each LLC (see Table 37) is greater or less than the outstanding balance of the loans extended by the FRBNY, including accrued interest. 13 June 2009 Table 25. Outstanding Principal Balance of Loans Table 26. Summary of Portfolio Composition, Cash/Cash Equivalents, and Other Assets and Liabilities (in millions) Principal balance at closing . . . . . . . . . . . . . . . . Accrued and capitalized interest to 12/31/2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Principal repayment from closing to 12/31/2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Principal balance on 12/31/2008 . . . . . . . . . . . . Accrued and capitalized interest to 3/31/2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayment during the period . . . . . . . . . . . . . . Principal balance on 3/31/2009 . . . . . . . . . . . . . Senior loan Subordinate loan 28,820 1,150 267 38 29,087 1,188 36 29,123 14 1,202 Note: Unaudited. 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. Bear Stearns In March 2008, the FRBNY and JPMorgan Chase & Co. (JPMC) entered into an arrangement related to the 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 fund the purchase of a portfolio of mortgage-related securities, residential and commercial mortgage loans, and associated hedges from Bear Stearns. In the second quarter of 2008, 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 in tables 1, 9, and 10 of the H.4.1 statistical release. Additional details on the accounts of Maiden Lane LLC are presented in table 4 of the H.4.1 release. Information about the assets and liabilities of Maiden Lane LLC is presented in Tables 25 and 26. These tables are as of March 31, 2009, and are updated on a quarterly basis. (in millions) Agency CMOs . . . . . . . . . . . . . . . . . . . . . . . . . Non-agency CMOs . . . . . . . . . . . . . . . . . . . . . Commercial loans . . . . . . . . . . . . . . . . . . . . . . Residential loans . . . . . . . . . . . . . . . . . . . . . . . Swap contracts . . . . . . . . . . . . . . . . . . . . . . . . . TBA commitments4 . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . Cash & cash equivalents1 . . . . . . . . . . . . . . Adjustment for other assets2 . . . . . . . . . . . Adjustment for other liabilities3 . . . . . . . . Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value on 3/31/2009 Fair value on 12/31/2008 14,369 1,552 4,697 780 2,280 1,448 1,221 2,640 1,869 (5,505) 25,352 13,565 1,836 5,553 937 2,454 2,089 1,360 2,531 310 (4,951) 25,684 Note: Unaudited. 1. Including cash and cash equivalents on deposit in the Reserve Account. 2. Including interest and principal receivable and other receivables. 3. Including amounts payable for TBAs, collateral posted to Maiden Lane LLC by swap counterparties, and other liabilities/accrued expenses. 4. TBA commitments are commitments to purchase or sell mortgage-backed securities for a fixed price at a future date. Financial Tables: Maiden Lane LLC At March 31, 2009, the ratings breakdown of the $17.1 billion fair value of securities in the Maiden Lane LLC portfolio (as a percentage of aggregate fair value of all securities in the portfolio) was as presented in Table 27. American International Group (AIG) Recent Developments • The interest rate modification of the AIG credit facility, announced as part of the March 2, 2009 restructuring, was finalized and became effective as of April 17, 2009. AIG will continue to be charged interest at the three-month LIBOR rate plus 300 basis points, but the 3.5 percent floor on the contractual LIBOR rate has been removed. • On April 21, 2009, AIG announced its intention to accelerate the separation of several businesses by transferring AIU Holdings, which will serve as the holding company for AIG’s Commercial Insurance, Foreign General Insurance, and Private Client Group Table 27. Maiden Lane LLC Asset Distribution by Type and Rating Rating Security type1 Agency CMOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-agency CMOs . . . . . . . . . . . . . . . . . . . . . . . . . . . Other2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AAA AA+ to AA− A+ to A− BBB+ to BBB− BB+ and lower Gov’t/ Agency Total3 0.0 2.2 2.4 4.6 0.0 0.2 1.4 1.6 0.0 0.8 0.5 1.3 0.0 0.4 0.7 1.1 0.0 5.4 2.2 7.6 83.8 0.0 0.0 83.8 83.8 9.1 7.1 100.0 Note: Lowest of all ratings is used for purposes of this table; data are in percent. 1. This table does not include Maiden Lane LLC’s swaps and other derivative contracts, commercial and residential mortgage loans, and to be announced (TBA) investments. 2. Includes all asset sectors that, individually, represent less than 5 percent of aggregate portfolio fair value. 3. Rows and columns may not total because of rounding. 14 Credit and Liquidity Programs and the Balance Sheet Figure 2. Maiden Lane LLC Portfolio Distribution units, to a special purpose vehicle (SPV). This is the first step in a process announced on March 2, 2009 that will result in AIU Holdings having a separate board of directors and management team, and a distinct brand from AIG. Inc. The transfer prepares AIU Holdings for a potential sale of a minority interest stake. • On May 15, 2009, Fitch Ratings downgraded various AIG ratings, including the Issuer Default Rating (IDR) to ’BBB’ from ’A’ and the Issuer Financial Strength (IFS) rating on the company’s insurance subsidiaries. Simultaneously, Fitch affirmed AIG’s short-term IDR and commercial paper ratings at ’F1’. None of the other major credit rating agencies (Moody’s, S&P, or AM Best) announced any credit rating actions concerning AIG during May. • On May 19, 2009, AIG announced that six new independent director nominees—Harvey Golub, Laurette T. Koellner, Christopher S. Lynch, Arthur C. Martinez, Robert S. (Steve) Miller, and Douglas M. Steenland—will stand for election at the AIG annual meeting of shareholders, scheduled to be held on June 30, 2009. • On May 21, 2009, AIG announced that its chairman and CEO, Edward Liddy, has informed the AIG board of directors of his intent to step down once the board has successfully concluded its search for his successor(s) in these roles. • On May 28, 2009, AIG announced that it had completed the sale of its real estate holdings in the Otemachi District in Tokyo to Nippon Life Insurance Company, which paid approximately $1.2 billion in cash for the entire office building and approximately one acre of land on which it is situated. • Changes in borrowings under the revolving credit facility during May were relatively modest. Under the terms of the contract, interest is accrued quarterly, so no interest was added to the facility balance during the period. Background On September 16, 2008, the Federal Reserve announced that it would lend to AIG to provide the company with the time and flexibility to execute a valuemaximizing strategic plan. Initially, the FRBNY extended an $85 billion line of credit to the company. The terms of the credit facility were disclosed on the Board’swebsitewww.federalreserve.gov/monetarypolicy/ bst_supportspecific.htm). Loans outstanding under this facility are presented in table 1 of the H.4.1 statistical release and included in “Other loans” in table 9 of the 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. More detail on these two LLCs is reported below. Additional information is included in table 5 in the H.4.1 statistical release. (On October 8, 2008, the FRBNY was authorized to extend credit to certain AIG subsidiaries against a range of securities. This arrangement was discontinued after the establishment of the Maiden Lane II facility.) 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 facilitate 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. 15 June 2009 Figure 3. AIG Revolving Credit Note: The above data illustrate the amounts shown on the H.4.1 statistical release as Credit extended to the American International Group, Inc., which includes amounts owed to the Federal Reserve Bank of New York under the loan facility, 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 November 21 under a securities borrowing arrangement. Financial Tables: AIG Credit Facility Financial Tables: Maiden Lane II 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 Federal Reserve Bank of New York are guaranteed by each of AIG’s domestic, nonregulated subsidiaries that have more than $50 million in assets. These guarantees themselves are separately secured by assets pledged to the Federal Reserve Bank of New York by the relevant guarantor. 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 fund the purchase of residential mortgage-backed securities (RMBS) from the securities lending portfolio of several regulated U.S. insurance subsidiaries of AIG. On December 12, 2008, FRBNY loaned about $19.5 billion to Maiden Lane II LLC. Details of the terms of the loan are published on the FRBNY website. (www.newyorkfed.org/markets/maidenlane2.html). Figure 3 above displays credit extended to AIG over time through the credit facility including the principal, interest, and commitment fees along with the facility ceiling. The assets of Maiden Lane II LLC are presented in tables 1, 9, and 10 of the H.4.1 statistical release. Additional detail on the accounts of Maiden Lane II LLC is presented in table 5 of the H.4.1 release. Table 28. AIG Revolving Credit Facility Borrower Borrowing ($ billions) Balance on April 29, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Drawdowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance on May 27, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 1 3 44 Note: Unaudited. Information about the assets and liabilities of Maiden Lane II LLC are outlined in Tables 29 to 31. These tables are as of March 31, 2009 and are updated on a quarterly basis. As of March 31, 2009, the sector/rating composition of ML II LLC’s $16.4 billion RMBS portfolio, as a percentage of aggregate fair value, was as noted in Table 31 and Figure 4. 16 Credit and Liquidity Programs and the Balance Sheet Table 29. Maiden Lane II LLC Outstanding Principal Balance of Senior Loan and Fixed Deferred Purchase Price Table 30. Maiden Lane II LLC Summary of Portfolio Composition and Cash/Cash Equivalents ($ millions) ($ millions) Principal balance at closing . . . . . . . . . . . . . . . . Accrued and capitalized interest to 12/31/2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Principal repayment from closing to 12/31/2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Principal balance on 12/31/2008 . . . . . . . . . . . . Accrued and capitalized interest to 3/31/2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayment during the period . . . . . . . . . . . . . . . Principal balance on 3/31/2009 . . . . . . . . . . . . . Senior loan Fixed deferred purchase price $19,494 $1,000 27 3 0 19,522 0 1,003 68 (952) $18,638 9 0 $1,012 Type of asset Fair value on 3/31/2009 Fair value on 12/31/2008 Alt-A (ARM) . . . . . . . . . . . . . . . . . . . . . . . . . . Subprime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash & cash equivalents2 . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,401 9,744 2,226 297 $16,668 $ 5,226 10,796 2,817 351 $19,190 Note: Unaudited. 1. Includes all asset sectors that, individually, represent less than 5 percent of aggregate outstanding fair value of the portfolio. 2. Including cash and cash equivalents on deposit in the Expense Reimbursement Sub-Account. billion portfolio, as a percentage of aggregate fair value of all securities in the portfolio, was as noted in Table 34 and Figure 5. Note: Unaudited. As part of the asset purchase agreement, the AIG subsidiaries were entitled to receive from ML II a fixed deferred purchase price, plus interest on the amount. This obligation is subordinated to the senior loan extended by the FRBNY, and reduced the amount paid by ML II for the assets by a corresponding amount. Citigroup On November 23, 2008, the Treasury, the Federal Reserve, and the FDIC jointly announced that the U.S. government would provide support to Citigroup in an effort to support financial markets. The terms of the arrangement are provided on the Federal Reserve Board’s website. (www.federalreserve.gov/monetarypolicy/bst_ supportspecific.htm) Because the FRBNY has not extended credit to Citigroup under this arrangement, the commitment is not reflected in the H.4.1 statistical release. Financial Tables: 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. on which AIG Financial Products had written credit default swap and similar contracts. On November 25, 2008, the FRBNY loaned about $24.4 billion to Maiden Lane III LLC. Details of the terms of the loan are published on the FRBNY website (www.newyorkfed.org/markets/maidenlane3.html). The assets of the Maiden Lane III LLC are presented in tables 1, 9, and 10 of the 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 release. Information about the assets and liabilities of Maiden Lane III LLC is outlined in Tables 32 to 34. These tables are as of March 31, 2009, and are updated on a quarterly basis. As of March 31, 2009, the ABS CDO type/vintage/ rating composition of Maiden Lane III LLC’s $19.2 Bank of America On January 16, 2009, the Treasury, the Federal Reserve, and the FDIC jointly announced that the U.S. government would provide support to Bank of America to support financial market stability. The terms of the support are provided on the Federal Reserve Board’s website (www.federalreserve.gov/monetarypolicy/bst_ supportspecific.htm). The agreement has not yet been formally signed and is under review by the parties involved. Because the Federal Reserve has not extended credit to Bank of America under this arrangement, the commitment is not reflected in the H.4.1 statistical release. Table 31. Maiden Lane II LLC Asset Distribution by Sector and Rating (3/31/2009) RMBS sector Alt-A (ARM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subprime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rating AAA AA+ to AA− A+ to A− 2.0 10.4 0.2 12.6 2.5 4.2 1.0 7.7 1.6 4.7 0.6 6.9 BBB+ to BBB− BB+ and lower 2.0 5.2 0.9 8.1 18.8 35.0 10.8 64.6 Note: Lowest of all ratings is used for the purposes of this table; data are in percent. 1. Includes all asset sectors that, individually, represent less than 5 percent of aggregate outstanding fair value of the portfolio 2. Rows and columns may not total because of rounding Total2 26.9 59.5 13.6 100.0 17 June 2009 Figure 4. Maiden Lane II LLC Portfolio Distribution Financial Tables: Federal Reserve System Recent Developments • As noted in Table 35, total SOMA holdings exceeded $1 trillion as of March 31. Total earnings from the portfolio amounted to about $4.6 billion over the first quarter, with the bulk of the earnings attributable to holdings of U.S. Treasury, agency, and agencybacked MBS securities. • As noted in Table 36, interest income from Federal Reserve loan programs over the first quarter amounted to about $1.2 billion; interest earned on TAF loans and on loans to AIG accounted for most of the total. • As noted in Table 37, net income for FRBNY associated with the CPFF amounted to about $2 billion over the first quarter. Net income for Maiden Lane, Maiden Lane II, and Maiden Lane III was negative over the first quarter, mostly reflecting unrealized losses on the assets held by these entities. Background The Federal Reserve Banks annually prepare financial statements reflecting balances (as of December 31) and Table 32. Maiden Lane III LLC Outstanding Principal Balance of Senior Loan and Equity Contribution ($ millions) Principal balance at closing . . . . . . . . . . . . . . . . Accrued and capitalized interest to 12/31/2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Principal repayment from closing to 12/31/2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Principal balance on 12/31/2008 . . . . . . . . . . . . Accrued and capitalized interest to 3/31/2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayment during the period . . . . . . . . . . . . . . Principal balance on 3/31/2009 . . . . . . . . . . . . . Senior loan Equity contribution 24,339 5,000 45 22 24,384 5,022 87 (304) 24,168 43 5,065 Note: Unaudited. As part of the asset purchase agreement, AIG purchased a $5 billion equity contribution, which is subordinated to the Senior Loan extended by FRBNY. income and expenses for the year then ended. The Federal Reserve Bank financial statements also include the accounts and results of operations of several limited liability companies (LLCs) that have been consolidated with the FRBNY (the “consolidated LLCs”). The Board of Governors, the Federal Reserve Banks, and the consolidated LLCs are all subject to several levels of audit and review. The Reserve Banks’ financial statements and those of the consolidated LLC entities are audited annually by a registered independent public accountant retained by the Board of Governors. To ensure auditor independence, the Board requires that the external auditor be independent in all matters relating to the audit. Specifically, the external auditor may not perform services for the Reserve Banks or others that would place it in a position of auditing its own work, making management decisions on behalf of the Reserve Banks, or in any other way impairing its audit independence. In addition, the Reserve Banks, including the consolidated LLCs, are subject to oversight by the Board. The Board of Governors’ financial statements are audited annually by an independent audit firm retained by the Board’s Office of Inspector General. The audit firm also provides a report on compliance and on internal control over financial reporting in accordance with government auditing standards. The Office of Inspector General also conducts audits, reviews, and investigaTable 33. Maiden Lane III LLC Summary of Portfolio Composition and Cash/Cash Equivalents ($ millions) Asset Type High-Grade ABS CDO . . . . . . . . . . . . . . . . . . . . . Mezzanine ABS CDO . . . . . . . . . . . . . . . . . . . . . . Commercial real estate CDO . . . . . . . . . . . . . . . Cash & cash equivalents1 . . . . . . . . . . . . . . . . . . . Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value on Fair value on 3/31/2009 12/31/2008 13,565 1,832 3,761 1,508 20,665 18,770 3,104 4,791 408 27,073 Note: Unaudited. 1. Including cash and cash equivalents on deposit in the Expense Reimbursement Sub-Account and Investment Reserve Sub-Account 18 Credit and Liquidity Programs and the Balance Sheet Table 34. Maiden Lane III LLC Asset Distribution by CDO Type/Vintage and Rating CDO type/vintage Rating BBB+ to BBB− BB+ and lower Total1 AAA AA+ to AA− A+ to A− High-grade ABS CDO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2003-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1 0.1 0.0 0.0 4.5 2.3 2.2 0.0 0.0 0.0 0.0 0.0 0.6 0.6 0.0 0.0 65.6 25.8 25.3 14.5 70.8 28.7 27.6 14.5 Mezzanine ABS CDO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2003-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6 0.2 0.4 0.0 2.8 0.9 1.8 0.0 6.1 2.3 3.8 0.0 9.6 3.4 6.1 0.0 Commercial real-estate CDO . . . . . . . . . . . . . . . . . . . . . 2002-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.1 3.2 0.0 13.0 16.3 0.5 0.5 0.0 0.0 5.0 3.0 0.0 3.0 0.0 3.6 0.0 0.0 0.0 0.0 3.3 0.0 0.0 0.0 0.0 71.7 19.6 3.7 3.0 13.0 100.0 Note: Lowest of all ratings is used for purposes of this table; data are in percent. 1. Rows and columns may not total due to rounding tions 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 financial statements. Tables 35 through 37 present information for the SOMA portfolio, the Federal Reserve loan programs, and the so-called “variable interest entities”—the CPFF and Maiden Lane I, II, and III for the first quarter of this year. These data are not audited and will be provided on a quarterly basis between the release dates for the audited annual financial statements. Financial Tables SOMA Financial Summary Table 35 shows the Federal Reserve’s net assets and liabilities of the SOMA portfolio as of March 31, 2009, the related interest income and expense, and the unrealFigure 5. Maiden Lane III LLC Portfolio Distribution ized and realized gains for the quarter. U.S. government, federal agency, and government-sponsored enterprise securities, as well as agency-backed MBS comprising the SOMA portfolio are recorded at amortized cost, on a settlement-date basis. Rather than using a fair value presentation, amortized cost more appropriately reflects the Reserve Bank’s securities holdings 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 losses have no effect on the ability of the Reserve Banks to meet their financial obligations and responsibilities. As of March 31, 2009, the fair value of the U.S. government, federal agency, and GSE securities held in the SOMA, excluding accrued interest, was $606,489 million, mortgage-backed securities was $243,832 million, and investments denominated in foreign currencies was $23,556 million, as determined by reference to quoted prices for identical securities. The fair value is noted here solely for informational purposes. 19 June 2009 Table 35. SOMA Financial Summary As of March 31, 2009 SOMA Holdings ($ millions) SOMA assets U.S. government, federal agency, and government-sponsored enterprise securities, net . . . . . . Securities purchased under agreements to resell . . . . . . . . Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments denominated in foreign currencies1 . . . . . . . . Central bank liquidity swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . SOMA liabilities Securities sold under agreements to repurchase. . . . . . . . . Total SOMA holdings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest income/ (expense) Realized gains (losses) Unrealized gains (losses) Total earnings 553,107 0 240,801 23,615 308,672 3,918 12 929 87 1,271 (53) ... ... ... ... ... ... ... (1,562) ... 3,865 12 929 (1,475) 1,271 (70,590) 1,055,605 (35) 6,182 ... (53) ... (1,562) (35) 4,567 Balance Note: Unaudited. 1. Unrealized gains and losses result from the daily revaluation of the currency. Purchases and sales of U.S. government securities are conducted by the FRBNY under authorization and direction from the FOMC. The securities are bought from or sold to securities dealers and foreign and international accounts maintained at FRBNY at market prices. The Federal Reserve is also authorized by the FOMC to acquire U.S. government securities under agreements with the dealer to repurchase the securities (securities purchased under agreements to resell) and securities sold under agreements to repurchase. 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 mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. Outright transactions in mortgage-backed securities are recorded on settlement dates, which can extend several months into the future. Loan Programs Table 36 summarizes the loan balances and interest income of the Federal Reserve for the first quarter 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 AMLF, the PDCF, and credit extended to AIG. Amounts funded by the Reserve Banks under these programs are recorded as loans by the Reserve Banks. The Federal Reserve earned $1.2 billion of interest income from these loan programs during the first quarter of 2009. All loans must be fully collateralized to the satisfaction of the lending Reserve Bank, with an appropriate haircut applied to the collateral. At March 31, 2009, no loans were impaired, and an allowance for loan losses was not required. Consolidated Variable Interest Entities (VIEs) Table 37 summarizes the assets and liabilities of various consolidated VIE entities previously discussed in this financial report, along with the net position of senior and subordinated interest holders, and the allocation of the change in net assets to interest holders. FRBNY is the sole beneficiary of the CPFF LLC and the primary beneficiary of the Maiden Lane LLCs. CPFF holdings are recorded at book value, which includes amortized cost and related fees. Maiden Lane, Maiden Lane II, and Maiden Lane III holdings are recorded at fair value, which reflects an estimate of the Table 36. Interest Income—Loan Programs As of March 31, 2009 Interest income/ (expense) Net earnings Loan programs ($ millions) Balance Primary, secondary and seasonal credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Term Auction Facility (TAF). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Primary Dealer Credit Facility (PDCF) and other broker-dealer credit . . . . . . . . Credit extended to AIG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total loan programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total loan programs, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,080 467,278 82 327 82 327 6,745 18,116 45,966 607,185 0 607,185 50 33 715 1,207 0 1,207 50 33 715 1,207 0 1,207 Note: Unaudited. 20 Credit and Liquidity Programs and the Balance Sheet Table 37. Assets and Liabilities of Consolidated Variable Interest Entities As of March 31, 2009 Total Maiden Lane VIEs Consolidated LLCs ($ millions) CPFF ML ML II ML III Fair value of portfolio and assets of the consolidated LLCs Assets and liabilities of the consolidated LLCs and the net position of senior and subordinated interest holder Net portfolio assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities of consolidated LLCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net portfolio assets available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249,050 (500) 248,550 30,702 (5,350) 25,352 16,675 (2) 16,673 20,732 (5) 20,727 68,109 (5,357) 62,752 Loans extended to the consolidated LLCs by FRBNY . . . . . . . . . . . . . . . . . . . . 245,767 29,123 18,638 24,168 71,929 Other beneficial interests1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 245,767 1,202 30,325 1,012 19,650 5,065 29,233 7,279 79,208 Cumulative change in net assets since the inception of the programs Allocation of the change in net assets to interest holders Allocated to FRBNY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allocated to other beneficial interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cumulative change in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,783 0 2,783 (3,771) (1,202) (4,973) (1,965) (1,012) (2,977) (3,441) (5,065) (8,506) (9,177) (7,279) (16,456) 2,151 (438) 0 6 (14) 1,705 0 1,705 437 (36) (14) (757) (12) (382) (14) (368) 270 (68) (9) (1,835) (3) (1,645) (9) (1,636) 731 (87) (43) (6,903) (6) (6,308) (2,867) (3,441) 1,438 (191) (66) (9,495) (21) (8,335) (2,890) (5,445) 438 2,143 36 (332) 68 (1,568) 87 (3,354) 191 (5,254) Current period income of the consolidated LLCs Summary of consolidated VIE net income for the current year, through March 31, 2009, including a reconciliation of total consolidated VIE net income to the consolidated VIE net income recorded by FRBNY Portfolio interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense on loans extended by FRBNY2 . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense—other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portfolio holdings gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) of consolidated LLCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Net income (loss) allocated to other beneficial interests. . . . . . . . . . . . . Net income (loss) allocated to FRBNY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Add: Interest expense on loans extended by FRBNY, eliminated in consolidation2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) recorded by FRBNY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note: Unaudited. 1. Other beneficial interest holder related to Maiden Lane LLC is JPMC, and for Maiden Lane II LLC and Maiden Lane III LLC is AIG. 2. Interest expense recorded by each VIE on the loans extended by FRBNY is eliminated when the VIEs are consolidated in FRBNY’s financial statements and, as a result, the consolidated VIEs’ net income (loss) recorded by FRBNY is increased by this amount 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 FRBNY. As a consequence of the consolidation, the extensions of credit from FRBNY to the LLCs are eliminated, the net assets of the LLCs appear as assets on the Federal Reserve’s balance sheet, and the liabilities of the LLCs to entities other than FRBNY, including those with recourse only to the portfolio holdings of the LLCs, are included in other liabilities. The net portfolio assets available represent the net assets available to beneficiaries of the consolidated VIEs and for repayment of loans extended by the FRBNY. The 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 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 be incurred by the beneficiaries if the assets had been fully liquidated at prices equal to the fair value as of March 31, 2009.
@FedFRASER