Treasury earns $1.2 billion through legacy MBS purchase program
The Treasury Department reported a $1.2 billion gain on troubled mortgage-backed securities it bought through the Public-Private Investment Program. In March 2009, the Treasury launched PPIP to buy residential and commercial mortgage-backed securities at a time when many financial institutions were struggling to unload them and raise capital. Through the first quarter, private-sector fund mangers raised $7.4 billion, which was matched by the Treasury. Including an additional $14.7 billion in U.S. debt capital commitments, PPIP held $29.4 billion in total purchase power at the end of the first quarter. Of the $7.3 billion of matched capital put up by the Treasury, $5.2 billion has been spent to buy troubled MBS. In a report released last week, the Treasury said those investments netted taxpayers $1.2 billion in unrealized gains as of March 31. If the $523 million in interest and principal paid back to the Treasury is included, the PPIP investments saw a 33% return. So far, the private fund managers drew down roughly $20.9 billion, or 71.2% of the total purchasing power. The Treasury broke down its MBS investments by product type in the graph below. PPIP bought roughly $17.7 billion of private-label RMBS and $4.4 billion CMBS. Subprime securities made up 11% of the residential securities, or $1.9 billion. Through the first quarter, the eight individual funds reported returns ranging from 22% to 51%. Banking analysts recently called the program a success that far and even called for a second round of PPIP to help buy-up assets in the shadow inventory of foreclosures. "We're still in the program's initial stages, but we are pleased with the returns we've seen thus far," a Treasury spokesman said. Write to Jon Prior. Follow him on Twitter @JonAPrior.