Fed bail outs of AIG and Bear Stearns show 'paper profit', reports claim

2 August 2010

Government securities acquired from Bear Stearns and American International Group (AIG) are showing a ‘paper profit’ for the first time, the Federal Reserve (Fed) has claimed.

According to the Fed, the value of the holdings belonging to all three investment vehicles set up to contain the assets has increased.

The figures, which were revealed in the Fed’s quarterly statement, went up by an estimated $2 billion to over $69 billion.

Investments in Bear Stearns increased to $29.4 billion while the holdings in the two companies set up to contain assets owned by AIG rose to over $39 billion.

Maiden Lane I, a company which is jointly run by the Fed and JPMorgan Chase, is responsible for the management of the assets owned by Bear Stearns while Maiden II and III are looking after assets belonging to AIG.

Meanwhile, new figures from the US government showed that economic growth in the US slowed to 2.4 per cent during the second quarter of the year.

The figure fell from a revised rate of 3.7 per cent seen across the first three months of 2010.

By Jim Ottewill

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