Treasury pulls $25 billion profit on MBS’s

WASHINGTON (Reuters) – The Treasury Department said on Monday it made a $25 billion profit on sales of mortgage-backed securities acquired during the financial crisis, part of its ongoing efforts to wind down taxpayer-financed bailout programs.

The sales were the latest indication the multiple programs the government and Federal Reserve initiated to bail out the financial sector may turn out to be less costly than originally feared.

The Treasury bought $225 billion of MBS in 2008 and 2009 in an effort to keep the mortgage market from freezing up as private investors fled. The $250 billion it reaped from the investment reflected both principal and interest.

“The successful sale of these securities marks another important milestone in the wind-down of the government’s emergency financial crisis response efforts,” Treasury Assistant Secretary Mary Miller said.

The government purchased the mortgage debt as part of a bid to stabilize the housing industry, using funds authorized by the Housing and Recovery Act of 2008. It was one of several programs running in parallel with the Troubled Asset Relief Program, or TARP, which was set up during the administration of President George W. Bush to buy toxic assets from banks, but that ended up largely as a mechanism to inject capital into financial institutions.