Losses related to commercial mortgage-backed securities pledged to the Term Asset-Backed Securities Loan Facility could exceed $500 million, the Government Accountability Office said Friday.

The Talf, which is run by the Federal Reserve Bank of New York, has largely been viewed as a program that would present few, if any, chances of loss. Any losses would be covered by $20 billion the Treasury Department has pledged to the program.

The Treasury rejected the GAO's loss prediction.

"The Treasury currently projects a net profit from Talf," Herbert Allison, the Treasury's assistant secretary for financial stability, wrote in a letter to the GAO dated Feb. 1. "We disagree with GAO's methodology in projecting those losses."

The GAO complained that it could not fully assess the risks because it views the Talf as a form of monetary policy, which it is banned from critiquing. The Federal Reserve said the GAO was welcome to review the program.

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