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US Treasury to sell $142 bn worth of toxic assets

21 march 2011, 21:31
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Vesti.kz stock photo
Vesti.kz stock photo
The US Treasury Department on Monday said it would begin to sell-off toxic assets worth an estimated $142 billion, in an effort to close another chapter of the financial crisis, AFP reports.

"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 department said it would offload up to $10 billion in mortgage-backed securities (MBS) -- assets which bundle together large numbers of often distressed mortgages -- each month.

The products, secured by state-backed mortgage giants Fannie Mae and Freddie Mac, were bought as part of the 2008-2009 financial sector bailout.

Their value plummeted after the housing bubble popped, prompting fears that a spat of asset write-downs could drag down individual banks and further plunge the financial system into panic.

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.

The Treasury has also recently offloaded equity stakes in Citigroup, General Motors, Ally Financial and AIG it took to help them survive the crisis.

US insurer American International Group recently offered to buy back $15.7 billion in mortgage-backed securities from the Federal Reserve as part of its efforts to emerge from a government bailout.

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