AIG, Maiden Lane, and Buying CDOs

I have another question concerning AIG and CDOs that maybe someone can help with. The Fed set up Maiden Lane II and III as special purpose vehicles to assist in the bailout of AIG. These funds buy the underlying CDOs that AIG wrote insurance on. Once the funds own the underlying CDOs, they can extinguish the CDS written on them (thus saving AIG from collateral calls and further writedowns). So here is the question: If one of the big problems with TARP was how to buy mortgage backed securities from the banks, how is the Fed managing to buy tens of billions of mortgage backed securities to bail out AIG? It would seem a particularly difficult transaction since the holder may own the CDO as well as the CDS, ie,, the insurance. So does the Fed just have to pay 100% on the dollar? Well, that would explain how they can get the deals done.