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US Government Continues Wind Down Of MBS Investment

by Leroy Baker, Tax-News.com, Washington

03 June 2011


The United States Treasury has provided an update on the continued wind down of its agency-guaranteed mortgage-backed securities (MBS) portfolio acquired during the recent financial crisis, in which it shows that it has now recovered 59% of its original USD225bn investment.

A Treasury report details that, during the month of May 2011, taxpayers received an additional US12.9bn in proceeds from this investment through sales by the Treasury, and that, up to that date, taxpayers had received a cumulative total of USD133.8bn.

The Treasury made its MBS investment during 2008 and 2009 through authority provided to it by Congress under the Housing and Economic Recovery Act of 2008. It was hoped that the MBS purchases would help “to stabilize the financial markets and preserve access to mortgage credit during a period of unprecedented market stress”.

In March this year, the Treasury announced that it would begin the orderly wind down of its MBS portfolio. The Treasury plans to sell up to USD10bn in MBS principal per month, subject to market conditions. The sale is part of Treasury’s continued efforts to wind down emergency financial crisis response programmes.

However, as the MBS market has improved considerably since Treasury purchased the securities, and, based on current market conditions, it now expects to make a profit for taxpayers on the investment.

TAGS: tax | economics | fiscal policy | capital markets | real-estate | United States

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