AIG announced yesterday that it had completed a sale of residential mortgage backed securities (“RMBS”) to Maiden Lane II, a fund established by the Federal Reserve Bank of New York (the “NY Fed”) as part of its plan to ensure AIG remains solvent. The assets, with a face value of $39.3 billion, were purchased by Maiden Lane II for $19.8 billion. The fund was established to eliminate the liquidity issues associated with AIG’s securities lending program. Under that program, AIG would lend securities to customers in exchange for cash collateral. AIG then invested the cash collateral in RMBS. When the value of the RMBS plummeted, AIG was unable to return collateral to customers in a timely manner. Yesterday’s transaction was designed to inject liquidity into the securities lending program, which has since been terminated. Finally, yesterday’s transaction means the $37.8 billion facility announced by the NY Fed on October 8, 2008 will be terminated. AIG’s 8-k filing regarding this transaction can be found by clicking here.