Saturday, April 23, 2011

Treasury investment funds report $1.7B gains

WASHINGTON (AP) -- The Treasury Department said Friday that an investment program set up during the financial crisis to buy toxic assets from banks is showing a $1.7 billion gain.

The department committed $22.1 billion in taxpayer funds to the Public-Private Investment Program, which was created in March 2009. The money has been used to set up funds that have invested in mortgage-backed securities and other financial assets. The goal is to take those assets off the books of large banks that were facing huge losses from bad real estate investments during the housing bubble.

The department has earned more than $500 million in dividends and other profits from the investments, Treasury said. And Treasury's share of the securities held in the funds has increased in value by $1.2 billion.

The department reports on the status of the funds each quarter.

The funds are managed by private investment companies, including AllianceBernstein, Blackrock Inc. and Invesco. Those companies have invested $7.4 billion in the funds, an amount matched by Treasury. Treasury also lent another $14.7 billion. The department tapped the $700 billion financial-system bailout fund, known as the Troubled Asset Relief Program, for the money.

Treasury has said that it expects to earn profits on many of its efforts to bailout the financial system. For example, the department says taxpayers have received $12.3 billion in profits from the $45 billion invested in Citigroup, and could make a similar gain from its investment in troubled insurer American International Group. The government is still selling its stake in AIG.

Still, many critics charge that the profits are small given the risk the government took. Private investors, such as billionaire Warren Buffett, demanded higher rates of interest when lending to banks and investment firms during the financial crisis.

And a congressional oversight panel noted last month that the Obama administration has had little success in using bailout funds to prevent home foreclosures.

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