Highlights
For factors affecting reserve balances at depository institutions, Reserve Bank credit decreased $2.8 billion for the week ended December 2 after slipping $1.6 billion the week before.

The decline in Reserve Bank credit was led by a $6.8 billion fall in credit extended to American International Group, followed by a $6.0 billion decline in term auction credit. Also falling notably were federal agency debt securities, down $2.7 billion, and central bank liquidity swaps, down $2.4 billion.

Partially offsetting these declines were gains in other components with the largest boost being in preferred interests in AIA Aurora LLC and ALICO Holdings LLC, which jumped $7.1 billion. This was a new line item in both factors affecting reserve balances of depository institutions and in the consolidated statement (balance sheet).

The latest balance sheet release explained AIA Aurora LLC and ALICO Holdings LLC.

"In conjunction with the restructuring of the government's assistance to American International Group, Inc. (AIG) announced March 2, 2009, the outstanding balance and amount available of revolving credit provided to AIG by the FRBNY has been reduced in exchange for preferred interests in two special purpose vehicles, AIA Aurora LLC and ALICO Holdings LLC. These two limited liability companies were created to directly or indirectly hold all of the outstanding common stock of American International Assurance Company Ltd. (AIA) and American Life Insurance Company (ALICO), two life insurance subsidiaries of AIG. AIG will retain control of AIA Aurora LLC and ALICO Holdings LLC, and the FRBNY will have certain consent, disposition, and conversion rights with respect to its preferred interests."

Basically, the drop in credit to AIG and the jump in holdings of these two new entities were mostly offsetting shifts in ledger entries.

Total assets of all Federal Reserve Banks dipped $2.3 billion in the latest week after declining $2.4 billion for the week ended November 25. Total assets include holdings by the Fed for non-depository institutions.