On Thu, 09 Oct 2008 19:53:41 -0400, shag <shag at cleandraws.com> wrote:
> Now, though, we're seeing the downside of this financial
> internationalization.
> Many of the mortgages and mortgage securities owned
> or guaranteed by Fannie Mae and Freddie Mac were bought
> by foreign central banks, which wanted to own dollar-based
> securities that carried slightly higher interest rates
> than boring old U.S. Treasury securities. A big reason the Fed and
> Treasury felt compelled to bail out Fannie and Freddie was the fear
> that if they didn't, foreigners wouldn't continue funding our trade
> and federal-budget deficits.
And would instead buy these US (and UK) financial institutions directly?
It doesn't logically follow that using debt funded by foreign institutions to purchase banking assets would be preferred by those institutions then simply being allowed to acquire those assets directly, and thereby increase their direct influence (in addition to the defacto influence they already have) within the global financial system.
It does follow that preemptively buying up these assets, even if this increased the debt, would be preferable for US-based interests seeking to mitigate the raise in influence of these institutions.
Is that the same as what is being argued above?
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