WASHINGTON (AFP) – The US Treasury Department on Monday said it would start selling-off mortgage-backed securities worth an estimated $142 billion, in an effort to close another chapter of the financial crisis.
The department said each month it will offload up to $10 billion in mortgage-backed securities (MBS), assets which bundle together large numbers of mortgages.
“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,” said Treasury official Mary Miller.
The products, secured by state-backed mortgage giants Fannie Mae and Freddie Mac, were bought as part of the 2008-2009 financial sector bailout.
As the housing bubble began to burst the Treasury and Federal Reserve bought up swathes of so-called “toxic assets,” when losses appeared to be endangering individual banks and the financial system at large.
But the Treasury said the market for asset-backed derivatives is now much more robust, three years after the depths of the crisis.
“The market for agency-guaranteed MBS has notably improved since the time Treasury purchased these securities in 2008 and 2009,” it said in a statement.
The Treasury hopes to net $15-20 billion profit from the sale, depending on market conditions.
According to Nancy Vanden Houten, an analyst at Stone & McCarthy, that estimate “might be on the high side,” but a profit was likely.
“I think perhaps something closer to $10 billion is more reasonable.”
The Treasury has recently offloaded equity stakes in Citigroup, General Motors, Ally Financial and American International Group that it took on to help them survive the crisis.
AIG recently offered to buy back $15.7 billion in mortgage-backed securities from the Federal Reserve as part of its effort to emerge from a government bailout.