The Federal Reserve said Wednesday it declined American International Group’s (AIG: 35.13 -0.03%) offer to purchase all of the assets in Maiden Lane II and instead will have an investment management firm sell it off in pieces.Maiden Lane is the name of several residential mortgage securitization platforms created to clear toxic mortgage investments.The original Maiden Lane was created to facilitate the merger of JPMorgan Chase & Co. (JPM: 46.54 +0.95%) and Bear Stearns Cos. by purchasing about $30 billion in assets from the mortgage desk at Bear Stearns, according to the New York Federal Reserve.Maiden Lane II was created to alleviate capital and liquidity pressures on AIG stemming from its securities lending program by purchasing $20.5 billion in RMBS from several of AIG’s U.S. insurance subsidiaries. It is primarily mortgages supported by either Fannie Mae or Freddie Mac, the government-sponsored enterprises. Also in large volume are RMBS made up of pools of option ARMs and alt-A mortgages. AIG wanted to buy the assets back but the Fed thinks it can make more through individual sales."After careful review, the Federal Reserve Bank of New York and the Board of Governors of the Federal Reserve System judged that the public interest in maximizing returns from any sale and promoting financial stability would be better served by an alternative approach to realizing value that is also more consistent with normal market practice," a statement said.Improved conditions in the secondary market for nonagency residential mortgage-backed securities (RMBS), and a high level of interest by investors, helped led the Fed decision, it added.BlackRock Solutions will dispose of the securities in the ML II portfolio individually, providing an opportunity for more investors to bid and potentially higher profits.There is no fixed time frame for the individual sales and the Fed ordered BlackRock to accept bids only if they mean a profit.