This came across the headlines today and it shows how misunderstood the whole “bailout” was and is.
| WASHINGTON (CNNMoney) -- Treasury just scored a big win -- it got rid of one of its financial-crisis era portfolios of mortgage-backed securities and made a hefty $25 billion profit, the department announced Monday. Treasury bought $225 billion worth of mortgage-backed securities during the height of the financial crisis starting from October 2008 through December 2009. Some of those securities were backing up loans thought to be worthless, financial analysts reported at the time. But Treasury's portfolio was made up mostly of 30-year fixed rate mortgage backed securities were guaranteed by Fannie Mae or Freddie Mac, making them more valuable. Last March, Treasury started the process of selling those securities. The agency reported that the total of cash from the sales, the principal and interest paid taxpayers back $250 billion. However, if the mortgages behind those securities fail, taxpayers will still be on the hook, since federal housing giants guarantee the loans and taxpayers have been propping up Fannie Mae and Freddie Mac. Treasury heralded the profit, calling it a successful winddown of a useful program that helped the nation navigate the financial crisis. "The successful sale of these securities marks another important milestone in the wind down of the government's emergency financial crisis response efforts," said Assistant Secretary for Financial Markets Mary Miller in a statement. |
When the Treasury purchased $225 bln of mortgage bonds during the crisis in 2008 and 2009, it was simply an exchange of MBS for cash deposits (reserves) in the banking system, right?
Now the Treasury sells back those same mortgage backed securities to those same investors for a “profit” of $25 bln. So what has happened? Those investors (taxpayers) LOST $25 bln on that trade. (They sold for $225 bln and bought them back for $250 bln.)
Yet the news is calling this a profit for taxpayers.
Crazy!!
2 comments:
"Some of those securities were backing up loans thought to be worthless, financial analysts reported at the time. But Treasury's portfolio was made up mostly of 30-year fixed rate mortgage backed securities were guaranteed by Fannie Mae or Freddie Mac, making them more valuable."
They are guaranteed by the GSEs which are in turn guaranteed by the Treasury.
So they "made money" on securities that they themselves actually guaranteed.
This is like how Mike pointed out last week that the Fed gets interest from Treasury that it then pays back to Treasury... and then they both brag about the associated "deficit reduction".
We have some real morons running things (and reporting on things) wrt these issues...
Resp,
Yes, idiots. And I'd like to know how this is a profit for "taxpayers?" How do we benefit? Is there some kind of distribution of this profit? Do we get a check? Is this profit "used" for some other expenditure that would benefit us? How? How is it a profit for taxpayers?
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