Friday, October 3, 2008

Treasury Hired State Street, Barclays for MBS Program

By Rebecca Christie and John Brinsley

Oct. 3 (Bloomberg) -- The U.S. Treasury hired State Street Bank and Trust Co. and Barclays PLC to manage its mortgage-backed securities purchase program announced last month.

The Treasury hired the firms on two-year contracts that can be extended for up to three more years, the department said today in Washington. Officials have so far planned to buy $10 billion of mortgage debt under the program, which was created at the same time the Treasury seized Fannie Mae and Freddie Mac Sept. 7 in an effort to avert a collapse in the home-loan market.

The purchases are part of the biggest expansion of the government's role in financial markets since the Great Depression. The Treasury separately today won authority to buy up to $700 billion of distressed assets in the biggest effort to shore up the financial industry.

In September, the Treasury said the mortgage-backed security program's growth would be based on ``developments in the capital markets and housing markets.'' The purchasing authority extends through 2009, although the Treasury is allowed to hold any securities it purchases until they mature.

The Treasury has said it will release financial details of the program as part of its monthly budget statement.

Barclays and State Street will receive fees of 3 basis points for the first $5 billion in assets under management, or a potential total of $1.5 million. They get 2 basis points on the next $5 billion, and 1 basis point on assets above $10 billion.

State Street's contract is dated Sept. 15 and Barclays's contract is dated Sept. 18.

To contact the reporters on this story: Rebecca Christie in Washington atRchristie4@bloomberg.net; John Brinsley in Washington atjbrinsley@bloomberg.net

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