On Jul 30, 2008, at 2:29 PM, Marvin Gandall wrote:
> "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
Hmm, well, no surprise there. The integrity of the dollar depends on the GSEs' debt being repaid in full. I think Paulson knew this even before he got the call from China. And no doubt he told Bush he had to sign the legislation regardless of any objections coming from the right.
Doug