A growing appetite for risk is encouraging some Wall Street banks to buy into the same intricate and troubled assets that contributed to the 2008-2009 financial crisis, according to a report.
The Wall Street Journal reports that complex mortgage-backed assets tied to the bailout of American International Group, now valued at $47 billion and held by the Federal Reserve Bank of New York, are drawing interest from banks such as Barclays Capital, Credit Suisse and Goldman Sachs.
The problem is some of these institutions were associated with the financial instruments when the government moved to rescue AIG in 2008 after the instruments caused record losses across the financial industry. The Fed moved to purchase the assets in 2008 when their value plunged, effectively shielding the big banks from losses.
A potential sale of those assets to major banks by the New York Fed in the coming months could stir controversy, the Journal reported. That move, coupled with the government’s recent decision to resume selling some of its AIG stock, “could set the stage for the U.S. to recover the bulk of its money from the bailout before the presidential elections this year,” the Journal said.
