$25 Billion Made On Housing Market Rescue
March 19, 2012 by UPI - United Press International, Inc.
WASHINGTON (UPI) — The U.S. Treasury said Monday it made a $25 billion profit on $225 billion invested in mortgage-backed securities during the financial crisis.
The government began selling securities last year that were backed by the Federal Home Loan Mortgage Corp., known as Freddie Mac, and the Federal National Mortgage Association, known as Fannie Mae.
“These [mortgage-backed securities] purchases helped preserve access to mortgage credit during a period of unprecedented market stress,” Treasury said in a statement released Monday.
Banks bundle mortgages and sell them as securities, thereby reaping a profit sooner — compared with a typical mortgage length of 30 years.
Banks also use their earnings to make other loans. Therefore, when the securities don’t sell, lending dries up.
When the financial crisis hit, banks were suddenly holding on to billions of dollars worth of assets they could not sell — assets referred to as “frozen assets” or “toxic assets.”
From Treasury’s point of view, unloading these assets as quickly as it did validates the value of the program. The profit is a bonus.
“The successful sale of these securities marks another important milestone in the wind down of the government’s emergency financial crisis response efforts,” Assistant Secretary for Financial Markets Mary Miller said in a statement.
“This program helped support the housing market during a critical moment for our nation’s economy and delivered a substantial profit for taxpayers,” he said.