How Much of Fannie/Freddie Paper is Held Overseas?

Sunday, July 20, 2008 | 09:40 PM

20080721_banks_graphic_2 QuestionHow widely held is Fannie Mae and Freddie Mac paper?

AnswerVery.

Via Monday's NYT:

"For more than a decade, Fannie Mae and Freddie Mac, the housing giants that make the American mortgage market run, have attracted overseas investors with a simple pitch: the securities they issue are just as good as the United States government’s, and they usually pay better.

The marketing plan worked. About one-fifth of securities issued by Fannie, Freddie and a handful of much smaller quasi-governmental agencies, some $1.5 trillion worth, were held by foreign investors at the end of March. One out of 10 American mortgages is, in effect, in the hands of institutions and governments outside the United States.

Now that the two companies are at risk, how their rescue is handled will ultimately test the world’s faith in American markets. It could also influence the level of interest rates and weigh on the strength of the dollar for years to come, analysts say.

“No less than the international perception of the credit quality of the U.S. government is at stake,” said Richard Hofmann, an analyst with CreditSights, an independent research house with offices in London and New York."

So these jackass SIVs that were stretching for higher yield bought GSE paper that went bad -- Are you trying to tell me we are guaranteeing the private sector investments of foreign governments also? Do the words "fuck 'em" mean anything?

When the hell is this going to end? The US taxpayer simply cannot be the guarantor of last resort for every bad bet made by anyone anywhere. Any nation that does that turns their children into indentured servants for generations.

Discuss . . .

Agencies8

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Source:
Trouble at Fannie and Freddie Stirs Concern Abroad   
HEATHER TIMMONS 
NYT, July 21, 2008   
http://www.nytimes.com/2008/07/21/business/21bank.html

Too Chinese (and Russian) to fail?
Brad Setser
Council on Foreign Relations, July 12th, 2008
http://blogs.cfr.org/setser/2008/07/12/too-chinese-and-russian-to-fail/

Related:
Freddie Mac May Slow Purchases of Mortgages to Preserve Capital
Dawn Kopecki and Jody Shenn
Bloomberg, July 21 2008      
http://www.bloomberg.com/apps/news?pid=20601087&sid=a7F3y2TbdVEs&

Paulson Says Fannie-Freddie Plan Critical to Confidence in U.S.   
John Brinsley
Bloomberg, July 21 2008      
http://www.bloomberg.com/apps/news?pid=20601087&sid=aoXgLo6UXOvI&

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Sunday, July 20, 2008 | 09:40 PM | Permalink | Comments (64) | TrackBack (0)
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Comments

It seems that we keep relying on the government more and more. I hope we get through this and learn a few lessons about bubbles, greed and politics.

Posted by: Greg | Jul 20, 2008 9:54:45 PM

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