) -- The

Federal Reserve Bank of New York

has declined

American International Group


(AIG) - Get Report

$15.7 billion offer to buy a subprime mortgage portfolio the government purchased from the insurer in the early days of the financial crisis.

Instead, the the Fed is accepting bids for the assets, dubbed Maiden Lane II, and will sell them "over time," with


(BLK) - Get Report

acting as manager.

"In light of improved conditions in the secondary market for non-agency residential mortgage backed securities (RMBS), and a high level of interest by investors, the Federal Reserve believes that conditions are right for ML II to begin more extensive asset sales while taking appropriate care at all times to avoid market disruption," the Fed said in a statement.

Maiden Lane II is a portfolio of residential mortgage bonds that the Fed purchased from AIG in 2008 for $19.5 billion in order to give the insurer the ability to clean up its balance sheet.

The portfolio is said to apparently drawing interest from


(BCS) - Get Report


Credit Suisse

(CS) - Get Report




Avenue Capital Group


Oaktree Capital Management

, according to

The Wall Street Journal.


--Written by Maria Woehr in New York.

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