By Agency reporter

Tuesday, 25 Jan 2011

WASHINGTON: The United States Treasury’s toxic asset funds have gained by 27 per cent since they were created to help revive the mortgage-backed securities market, according to data released late on Monday.

Reuters reported on Monday that as part of the government’s deeply unpopular $700bn bail-out programme, the funds were set up to remove illiquid securities from banks by matching private capital with taxpayer money and Treasury loans via funds run by private investment managers.

Although furor over the bailout helped Republicans win control of the House of Representatives in the recent election, the government has been recouping taxpayers’ money.

The eight toxic asset funds, run by asset managers such as BlackRock Incorporated, Invesco Limited and Marathon Asset Management, are all profitable.

Since the funds were established in 2009, they have used about $5.2bn of Treasury’s equity investment to buy toxic assets. As of the end of 2010, the funds have gained by $1.1bn to about $6.3bn, according to the data.

Including some $300m in equity distributions, the Treasury’s investment increased by 27 per cent or $1.4bn, according to the data.

The Treasury Department had initially proposed buying up to $1tn in illiquid mortgage-related securities to help clean up banks’ balance sheets.

But the programme was scaled down considerably as banks proved they could attract private capital in both the equity and debt markets without first selling off illiquid securities.

As of December 31, the funds had about $29.4bn of purchasing power and had drawn down about 70 per cent of the total amount, according to the data.

Source: Punch