The Federal Reserve has selected JP Morgan Chase & Co. (JPM) as custodian for its mortgage-backed securities purchase program, the New York-based bank said in a press statement Tuesday morning. The program, which began on January 5, 2009, will purchase up to $500 billion in MBS that are backed by Fannie Mae (FNM), Freddie Mac (FRE) and Ginnie Mae (GNM), in an effort to maintain liquidity in a vital section of the U.S. mortgage market. Through the end of January, the Fed had purchased about $69.5 billion in various MBS under the program, just less than 14 percent of its total $500 billion purchasing power. See earlier story. Via a competitive process, the Federal Reserve had earlier selected four investment managers — BlackRock Financial Management, Inc., Goldman Sachs Asset Management, L.P., Pacific Investment Management Company LLC (PIMCO), and Wellington Management Company, LLP. JPM’s appointment as custodian means it will oversee the purchase activities of each of the four firms. “We are proud to have been selected by the Federal Reserve for this important initiative,” said Conrad Kozak, CEO of J.P. Morgan Worldwide Securities Services. “We are pleased to be able to support the efficient operation of the MBS program, while at the same time minimizing operational and financial risks.” Write to Paul Jackson at [email protected]. Disclosure: The author held various put option contracts on JPM when this story was published; no other relevant direct holdings. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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