US Treasury Reaps Profit on Mortgage Bonds (AIG, GM)

March 19, 2012 by Paul Ausick

The US Treasury reported this morning that it had sold the last of the $225 billion in mortgage-backed securities (MBS) that it purchased beginning in 2008 at the height of what appeared to be the beginnings of a collapse of some major US financial institutions. With this last sale of MBS, the Treasury reports the US government made a profit of $25 billion.

The federal government has also recovered about $331 billion of the $414.3 billion disbursed under the troubled asset relief program (TARP), and the Congressional Budget Office estimates that the final cost of TARP to US taxpayers will be about $34 billion. The takeovers of Fannie Mae and Freddie Mac, not included in the MBS figures, cost taxpayers $151 billion. US taxpayers still own a majority stake in American International Group Inc. (NYSE: AIG) and Ally Financial, as well as a minority stake in General Motors Co. (NYSE: GM).

The MBS became attractive to investors when the federal government took over Fannie and Freddie, virtually guaranteeing the MBS and paying a higher return than other US bonds.