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Treasury's holdings of mortgage-backed securities drop as sell-off continues

The Treasury Department has so far recovered $146.9 billion of the $225 billion it spent to buy mortgage-backed securities from Fannie Mae and Freddie Mac in 2008 and 2009.

July 07, 2011|By Jim Puzzanghera, Los Angeles Times

Reporting from Washington — The Treasury Department has recovered about 65% so far of the $225 billion it spent to purchase mortgage-backed securities to help stabilize the housing market during the Great Recession.

As the government slowly sells off its holdings, officials reiterated Wednesday that they expected to make a profit on the sales of the securities purchased from mortgage financing giants Fannie Mae and Freddie Mac in 2008 and 2009.

Last month the Treasury sold $10.6 billion in securities and received an additional $2.1 billion in principal and interest payments, bringing the outstanding principal in the department's holdings to $94.5 billion.

The Treasury has recovered $146.9 billion of the $225 billion it spent to buy the securities, according to the department's latest report. That includes $35 billion in sales and $111.9 billion in principal and interest payments.

"These [mortgage-backed securities] purchases helped stabilize the financial markets and preserve access to mortgage credit during a period of unprecedented market stress," said Mary J. Miller, the Treasury's assistant secretary for financial markets.

The market for mortgage-backed securities has improved markedly since the Treasury Department purchased them, she said. "Based on current market conditions, Treasury expects to make a profit for taxpayers on this investment."

In 2008, Congress gave the Treasury Department the power to buy mortgage-backed securities that had government backing to help keep credit flowing in the housing market.

The portfolio stood at about $142 billion in March when the Treasury announced that it would slowly wind down the investments. It began selling about $10 billion worth of securities each month as it tried to minimize the effect of the sales on the mortgage-backed securities market.

jim.puzzanghera@latimes.com

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