[lbo-talk] A new kind of Dollar Diplomacy

[Marvin Gandall]

"It turns out the biggest supporter of the Fannie Mae and Freddie Mac 
bailouts has been the Chinese government. The Chinese own about half a 
trillion dollars in Fannie and Freddie securities and they've put the 
warning out to Treasury Secretary Hank Paulson they expect to be repaid in 
full. The fear among Mr. Paulson and other Treasury officials is that if 
Fannie and Freddie debt isn't repaid at 100% par, the Chinese may start 
dumping their hundreds of billions of dollars of Treasury securities, 
possibly causing a run on U.S. government debt and sharply raising Uncle 
Sam's borrowing costs."

- Political Diary

  Wall Street Journal

  July 29 2008