Chinese warn US against failure of FannieMae and FreddieMac ???

[Atlas]

TEOTWAWKI is surely at hand when we're being warned by the Chinese about the viability of our financial institutions...
Anyone else see a little irony here?

_______________________________________________________

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aslo2E01QVFI


Freddie, Fannie Failure Could Be World `Catastrophe,' Yu Says

By Kevin Hamlin

Aug. 22 (Bloomberg) -- A failure of U.S. mortgage finance companies Fannie Mae and Freddie Mac could be a catastrophe for the global financial system, said Yu Yongding, a former adviser to China's central bank.

``If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic,'' Yu said in e-mailed answers to questions yesterday. ``If it is not the end of the world, it is the end of the current international financial system.''

Freddie and Fannie shares touched 20-year lows yesterday on speculation that a government bailout will leave the stocks worthless. Treasury Secretary Henry Paulson won approval from the U.S. Congress last month to pump unlimited amounts of capital into the companies in an emergency.

China's $376 billion of long-term U.S. agency debt is mostly in Fannie and Freddie assets, according to James McCormack, head of Asian sovereign ratings at Fitch Ratings Ltd. in Hong Kong. The Chinese government probably holds the bulk of that amount, according to McCormack.

Industrial & Commercial Bank of China yesterday reported a $2.7 billion holding. Bank of China Ltd. may have $20 billion, according to CLSA Ltd., the Hong Kong-based investment banking arm of France's Credit Agricole SA. CLSA puts the exposure of the six biggest Chinese banks at $30 billion.

`Beyond Imagination'

``The seriousness of such failures could be beyond the stretch of people's imagination,'' said Yu, a professor at the Institute of World Economics & Politics at the Chinese Academy of Social Sciences in Beijing. He didn't explain why he held that view.

China's government hasn't commented on Fannie and Freddie.

Yu is ``influential'' among government officials and investors and has discussed economic issues with Premier Wen Jiabao this year, said Shen Minggao, a former Citigroup Inc. economist in Beijing, now an economist at business magazine Caijing.

Investor confidence in Fannie and Freddie has dwindled on speculation that government intervention is inevitable. Washington-based Fannie has fallen 88 percent this year, while Freddie of McLean, Virginia, has slumped 91 percent.

Paulson got the power to make purchases of the two companies' debt or equity in legislation enacted July 30 that was aimed at shoring up confidence in the businesses. He has said the Treasury doesn't expect to use that authority.

The two companies combined account for more than half of the $12 trillion U.S. mortgage market.

To contact the reporter on this story: Kevin Hamlin in Beijing on khamlin@bloomberg.net;
Last Updated: August 22, 2008 06:09 EDT

[NYC Drew]

I wish a certain forum member or two would log on and tell us that compared to the great depression, we are doing fine.


'Drew

[DaleGribble]

Compared to the Great Depression, we are doing fine.

[Dennis in MA]

Who do Yu think yu are?

What are Yu saying?

Do Yu have any facts to back this up?

Flock Yu.

[Atlas]

Who do Yu think yu are?

What are Yu saying?

Do Yu have any facts to back this up?

Flock Yu.

:rofl:

[Dennis in MA]

Yu Yongding? Isn't that what got Michael Jackson in trouble???

(OK, now I'm trying too hard.)

[AJ Dual]

I wish a certain forum member or two would log on and tell us that compared to the great depression, we are doing fine.


'Drew

Yeah, but the Chinese are buying up dollars on the sly, IMO, they think the dollar has gone about as low as it's going to, and want to ride it back up. Plus they want to help the dollar, because the weak dollar strengthens the Chinese Yuan, and that's hurting thier own LCD TV, junky Harbor Freight tools, and fake rubber dog-poo exports.

Plus, even with the cost of oil so high, shipping suddenly ate up almost all of China's cheap labor advantage. Right now their major commodity exporters are coasting more on supply inertia, and the fact that there simply aren't domestic producers of about 80-90% of Wal-Mart junk here Stateside or in Europe anymore. If this goes on for a few more years (and it may well), Suddenly you'll see Europe and America get tooled up to make a bigger fraction of our own junk again, and China's in even bigger hurt.

China needs a strong dollar, and an artificially low Yuan to keep the factories turning. (And ultimately, they're only stalling, China has HUGE demograpic and natural resource problems in the disparity between the modern cities and the third-world countryside and it's enormous population. And it won't be pretty when it comes to a head...)

And what we've got now indeed is "nothing", if anything it's moderate stagflation, not even a real recession. There's three main things at work right now. Oil. The Bush Admin/Fed persued a weak dollar policy to try and get the trade imbalance under control, and it got away from them. And the housing credit bubble. The best thing to do with all three is just sit tight, let the market do it's thing. (And I include "Drill now, drill here!" in "letting the market do it's thing...")

And the great depression talk is indeed just silly, even as a comparison. What's going on now is a walk in the park even compared to 1969-1983. And there should be enough GT'ers here old enough to remember that time.

[straightblast]

Yeah, but the Chinese are buying up dollars on the sly, IMO, they think the dollar has gone about as low as it's going to, and want to ride it back up. Plus they want to help the dollar, because the weak dollar strengthens the Chinese Yuan, and that's hurting thier own LCD TV, junky Harbor Freight tools, and fake rubber dog-poo exports.

Plus, even with the cost of oil so high, shipping suddenly ate up almost all of China's cheap labor advantage. Right now their major commodity exporters are coasting more on supply inertia, and the fact that there simply aren't domestic producers of about 80-90% of Wal-Mart junk here Stateside or in Europe anymore. If this goes on for a few more years (and it may well), Suddenly you'll see Europe and America get tooled up to make a bigger fraction of our own junk again, and China's in even bigger hurt.

China needs a strong dollar, and an artificially low Yuan to keep the factories turning. (And ultimately, they're only stalling, China has HUGE demograpic and natural resource problems in the disparity between the modern cities and the third-world countryside and it's enormous population. And it won't be pretty when it comes to a head...)

And what we've got now indeed is "nothing", if anything it's moderate stagflation, not even a real recession. There's three main things at work right now. Oil. The Bush Admin/Fed persued a weak dollar policy to try and get the trade imbalance under control, and it got away from them. And the housing credit bubble. The best thing to do with all three is just sit tight, let the market do it's thing. (And I include "Drill now, drill here!" in "letting the market do it's thing...")

And the great depression talk is indeed just silly, even as a comparison. What's going on now is a walk in the park even compared to 1969-1983. And there should be enough GT'ers here old enough to remember that time.


Stay tuned...it isn't half-time yet.

I see nothing in the market which would make me believe the US $ is going higher on trend and underlying strength. The dollar appears headed down much lower over time.

[chowchow]

Oil is going down so things should get better soon. ANd with a new president coming there should be a new lease on life for the American economy. More optimism.