Aug. 17 (Bloomberg) -- The Federal Reserve dropped Pacific Investment Management Co. and Goldman Sachs Group Inc. from the list of firms helping the central bank purchase as much as $1.25 trillion of mortgage securities this year.

The move was disclosed in a statement posted today on the New York Fed’s Web page. Wellington Management Co. and BlackRock Inc., the other two managers hired as part of the unprecedented program that started in January, are being retained, according to the statement.

“These changes are not performance related,” the New York Fed said. The bank “anticipated that it would make adjustments to its use of external investment managers as it gained more experience.”

The change comes amid concern that the Fed’s asset managers may use inside information garnered from their roles in their other businesses. Representative Patrick Murphy, a Pennsylvania Democrat, sought reports to Congress on the potential conflicts earlier this year. The asset managers’ contracts call for a segregation of staff working on the program.

The central bank has bought a net $741.6 billion of securities guaranteed by government-supported Fannie Mae and Freddie Mac or federal agency Ginnie Mae through Aug. 12 under the program, according to data complied by Bloomberg.

Extend Program

Some analysts, including Credit Suisse Group’s Mahesh Swaminathan, say the central bank will likely extend the mortgage-bond program, which is scheduled to end Dec. 31 and is intended to cut home-financing costs to help curb the worst U.S. housing slump on record. Purchases under the Fed’s similar $300 billion Treasury program will last through October, rather than September, the Fed said last week.

Managers in the mortgage-bond program each quarter receive 1/16th of 0.0125 percentage point of the total average balance of debt held by the Fed, according to contracts for Pimco and Goldman posted on the New York Fed’s Web site. For $1 trillion, that would be $7.8 million.

Newport Beach, California-based Pimco has stepped back from other government-related programs. After co-Chief Investment Officer Bill Gross described Treasury Secretary Timothy Geithner’s Public-Private Investment Program as a “win-win- win,” his company dropped out of the running to be among the nine managers participating.

Pimco’s Roles

Pimco, the world’s largest fixed-income manager, cited “uncertainties regarding the design and implementation of” that program. The firm later was named collateral monitor for the Fed’s Term Asset-Backed-Securities Loan Facility on Aug. 4, and the New York Fed on July 24 named Chief Executive Officer Mohamed El-Erian to a new advisory panel including 12 other investors. It also manages the Fed’s commercial-paper facility.

Deborah Kilroe, a spokeswoman for the New York Fed, declined to comment beyond the statement. Andrea Raphael, a spokesman for New York-based Goldman Sachs, declined to immediately comment. Mark Porterfield, a spokesman for Pimco, didn’t immediately return telephone messages seeking comment.

Goldman Sachs, the New York-based bank, never applied to be a PPIP manager, Raphael said last month. It isn’t listed among vendors used by the central bank in other programs disclosed on the New York Fed’s Web site.

Under changes to the program, Boston-based Wellington Management will handle trading and settlement, and act as a secondary provider of risk and analytics support, according to the statement. New York-based BlackRock will be the primary provider of risk and analytics support, the Fed said.

“The agency MBS program has matured since it began in January, and the New York Fed has had time to further develop its internal analytical and operational expertise in this area,” according to the statement.

The program’s custodian remains New York-based JPMorgan Chase & Co., the Fed said.

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net

Last Updated: August 17, 2009 15:08 EDT