The Fed, Wall Street Prepare to Unleash Crisis 2.0 (Update 1)
NEW YORK (TheStreet Ratings) -- The Securities and Exchange Commission and AIG(AIG) accuse its manager of fraud, while Bank of America(BAC) and Bank of New York Mellon(BK) are fighting it in a multibillion lawsuit.
Now Federal Reserve Bank of New York is looking to send it back to Wall Street, where it will likely be broken up and sold to eager investors in spite of its notorious past.
That is the strange, bizarre world of the Triaxx.
While it may sound like a character from The Transformers, Triaxx is actually a collection "subprime" mortgages packaged into a vehicle called a collateralized debt obligation (CDO).
Vehicles like Triaxx are coming back in style as large, institutional investors look to juice fixed-income returns while corporate and U.S. debt yields hover near record lows. That's why the New York Fed said last week that it had received "several strong reverse inquiries for holdings" from Wall Street banks looking to sell the the high-yielding Triaxx assets and it plans to auction it off later this month.
Nine of the largest Wall Street banks -- including Citigroup(C) , Goldman Sachs(GS) and Morgan Stanley(MS) -- expressed interest in the Triaxx, the Fed statement said, and those banks will "invited" to bid on the assets.
Bank of America's Merrill Lynch unit was the winner of the auction, the Fed announced on Thursday.
"The winning bids, which were materially higher than the original prices