Five big banks have been invited by the Federal Reserve Bank of New York to bid on a stack of subprime paper with an unpaid prinicipal balance of $6 billion that was issued by American International Group Inc. (NYSE: AIG) in its Maiden Lane II special purpose vehicle. The Wall Street Journal identifies the five banks as Barclays PLC (NYSE: BCS), Credit Suisse Group AG (NYSE: CS), Goldman Sachs Group Inc. (NYSE: GS), Morgan Stanley (NYSE: MS), and the Royal Bank of Scotland.
The securities had a fair value of about $0.49 on the dollar at the end of December, and the WSJ notes that subprime-backed securities were trading at $0.51 on the dollar yesterday.
The proceeds from the sale will be used to pay back a portion of the approximately $7 billion that AIG still owes the New York Fed on a $40 billion loan.
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