Attempts at Relief and Reform

Treasury Hopes to Sell Securities Portfolio Within One Year

Posted on Monday, April 4, 2011

On Monday the Treasury announced that it will wind down the remaining $142 billion mortgage-backed securities (MBS) portfolio it carries.
This news comes just as the federal government is making plans to drastically reduce its role in the mortgage marketplace. The announcement is prompting many to wonder if the Federal Reserve will sell its portfolio, valued at more than $1 trillion, as well. The general consensus is that the Federal Reserve will hold on to its MBS, at least for now.
Beginning this month, Treasury plans to sell up to $10 billion in agency-guaranteed MBS each month, and says if
it manages to sell $10 billion per month the portfolio will be depleted in approximately one year.
“We’re continuing to wind down the emergency programs that were put in place in 2008 and 2009 to help restore market stability, and the sale of these securities is consistent with that effort,” said Mary J. Miller, assistant secretary for financial markets. “We will exit this investment at a gradual and orderly pace to maximize the recovery of taxpayer dollars and help protect the process of repair of the housing finance market.”
In 2008, Treasury purchased MBS to help preserve access to mortgage credit and stabilize the economy during the housing collapse. The agency says based on improved market conditions, it expects to make a profit for taxpayers on this investment.
At the end of each month, the Treasury will post the total MBS sales it has made.
Selling the securities is a part of the agency’s plan to wind down emergency programs that were established in 2008 and 2009.
The plan was already put in place by the expiration of the purchasing authority of the Troubled Asset Relief Program (TARP). By selling its final share in Citigroup stock, the Treasury locked in a profit of more than $12 billion.
By: Joy Leopold, DS NEWS



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