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US Government's MBS Investment Below USD100m

by Leroy Baker, Tax-News.com, Washington

12 July 2011


The United States Treasury has provided an update on the continued orderly wind down of its agency-guaranteed mortgage-backed securities (MBS) portfolio acquired during the recent financial crisis, in which it shows that the remaining amount of principal outstanding is now under USD100bn.

The Treasury made its MBS investment, originally totalling over USD225bn, 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. Treasury planned to sell up to USD10bn in MBS principal per month, subject to market conditions. The sale is part of the Treasury’s continued efforts to wind down emergency financial crisis response programmes.

The update now shows that the remaining amount of principal outstanding in the MBS portfolio is USD94.5bn, as, during the month of June 2011, taxpayers received an additional USD12.7bn in proceeds from this investment through sales by the Treasury, and, up to the end of last month, taxpayers had received back a cumulative total of USD146.9bn. The Treasury has therefore, to date, recovered 65% of its original investment.

In fact, as the MBS market has improved considerably since the Treasury purchased the securities, and, based on current market conditions, it has indicated that, at the end of its divestment process, it expects to make a profit for taxpayers on the investment.

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

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