Nation State or Investment Syndicate?

One of the instructive features of the housing bill is the nature of creditor politics that is a subtext on housing and mortgage politics these days. One investment newsletter this weekend reported that there are $947 billion dollars of Fannie and Freddie paper listed as being held in foreign exchange reserves worldwide, of which $100 billion was held by Russia.

That sounds low to me. However, since these are “reported” figures, we will work with them. Can you imagine the politics of a Fannie Mae or Freddie Mac bankruptcy when their largest investor also has nuclear bombs, submarines and satellites? Also, can you imagine the politics if the Russians bought their Fannie Mae and Freddie Mac securities with IMF and other foreign engineered “bail out” loans that were arranged contingent with a secret agreement that a portion of the proceeds would be used to buy Fannie Mae and Freddie Mac debt?

I once had a senior Russian official encourage me to switch sides, so to speak. I told him that no one ever accomplished anything betraying their country. Working inside was the best way to address policies gone off kilter. It was not until we parted company that I realized that I had been speaking with a representative of one of Fannie Mae’s largest investors.

Chinese Government is Top Foreign Holder of Fannie Mae, Freddie Mac Bonds

Report on Foreign Portfolio Holdings of U.S. Securities, as of June 30, 2007, published April 30, 2008 by U.S. Treasury, Federal Reserve Bank of New York, Board of Governors of the Federal Reserve System

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