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The Tangled Web

The Tangled Web

by Steve on February 13, 2011

Obama’s recent announcement outlining plans to divorce Fannie and Freddie has China rather upset. Go figure!

U.S Treasury data show that as of June 2009 China held $454 billion of long-term U.S. agency debt, the bulk believed to be Fannie and Freddie debt.

Payback for the trade deficit perhaps? Listening to our own politicians, we are given the impression that there’s nothing to worry about.

Last week, Lu Zhengwei, a senior economist at Industrial Bank Co., a small Chinese lender, said in a report that the commitment by the Obama administration to pay back holders of Fannie and Freddie securities amounts to an “empty check” without the support of the U.S. Congress. “Looking at the current political situation in the U.S., for the U.S. Congress to give a clear guarantee on this issue is almost impossible,” Mr. Lu said.?

Seems small Chinese lenders have a better understanding of our situation than our own leaders. Not to worry, we’re in good hands.

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