The Federal Reserve Bank in New York rejected AIG’s (American International Group) offer to buy back %1.57 billion in mortgage securities. Instead, the Federal Banks has decided to sell off the pieces over time, which poses a big problem for the insurer, and could possible weaken the financial position of the company, according to Chief Executive Robert H. Benmosche. “It’s a huge problem for us”, he said to DealBook in an interview. “This decision takes the potential price level down. How much, we don’t know. But it certainly puts pressure on the value of the shares that the Treasury can sell”.

Even though AIG claims it has made improvements in the mortgage market, the Federal Reserve has a lot of subprime-mortgage bonds from their bailout, and in selling them in pieces, it will allow them to make a profit, which gives them some vindication since they’ve been criticized for buying such risky securities.

To sell the securities, the Federal Reserve will post a bidding list like on Wall Street and allow buyers to place bids, they said in an email to people who expressed interest as buyers.