U.S. to Sell Off $145 Billion in Toxic Assets

The US Treasury Department is to begin selling off toxic assets worth an estimated $142bn (£87bn), in an effort to close another chapter of the financial crisis.

“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 $10bn in mortgage-backed securities (MBS) – assets which bundle together scores 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 bail-out.

Their value plummeted after the housing bubble burst, prompting fears that a spat of writedowns 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 $15bn to $20bn profit from the sale, depending on market conditions.

But critics argue that type of profit claim does not take into account other lost opportunities for investing the money.

The Treasury has also recently offloaded its equity stakes in Citigroup, General Motors, Ally Financial and AIG.

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

The news came as the US Supreme Court let stand a ruling that the Federal Reserve must disclose details about its emergency lending programs to banks during the financial crisis in 2008.

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