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) -- U.S. taxpayers made a tidy profit on a government program that purchased distressed mortgages, outstripping returns of several banks Uncle Sam originally purchased the paper from in 2009.

The U.S. Treasury Department on Monday published the latest report on its Legacy Securities Public-Private Investment Program (PPIP) which is a partnership with nine asset managers running eight investment funds, created in July 2009 as part of the Troubled Assets Relief Program, or TARP.

The Treasury said that as of December 31, its equity holdings in the funds had generated profits of 27%. That excludes another $4.1 billion fund that was liquidated during the first quarter of 2010, netting the Treasury a profit of $20.1 million.

That looks like a home run for the Treasury for less than two years, especially when compared to a bank investor over the same period of time.

For example, the passively managed Vanguard U.S. Mortgage Backed Securities Bond Index Fund returned an average of 6.52% a year over the three-year period ended December 31, for a back-of-the-envelope three-year total return of 19.56%.

The PIPP investing activity began on September 30, 2009. An investor purchasing


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at the close on that day would have paid $4.84, for a flat return at Monday's closing price of $4.86. For

Bank of America

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investors, the total return was a negative 17% over the same period, while investors in

Wells Fargo

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saw a 17% total return and


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shareholders a 3.5% total return.

Moving down to the smaller

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, the total return was a nice 48% over the same period, but it was a wild ride in between.

Admittedly, the PPIP's purpose was to unfreeze the market for mortgage-backed securities, which became highly illiquid in the wake of the financial crisis that began in 2008.

One-third of the funds' purchasing power of $29.4 billion was provided by the asset managers, some of which included partnerships managed by subsidiaries of


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, a

Angelo, Gordon & Co.


General Electric Capital Corporation

(a subsidiary of

General Electric

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) and


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The remaining two thirds of the funds' initial purchasing power was provided by the Treasury.

The funds invested in securities backed by prime, sub-prime, toxic Alt-A (

Fannie Mae



Freddie Mac


paper with lower credit standards than prime) and the vile option-payment adjustable-rate mortgages, otherwise known as option-ARMS.

Average discounts to par value paid on the mortgage-backed securities purchased by the funds during 2009 ranged from 36% for subprime and option-arm paper, 34% for Alt-A paper and 19% for securities backed by prime mortgages.


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Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.