Monday, September 8, 2008

Hardball From China: "We Don't Know What The Bailout Means"

It's not an official comment from China, but this is certainly a hardball comment out of The People's Republic, which holds some $376 billion in U.S. government agency debt.

"The impact of the U.S. government's bailout of Fannie Mae on China's holdings in the mortgage giants is unclear, an official from the State Administration of Foreign Exchange said Monday," MarketWatch is reporting.

The official, who declined to be named, didn't elaborate, according to MarketWatch.

This is a difficult to figure. Given that the Treasury is basically guarantying the entire $376 billion portion of debt that is Freddie and Fannie paper, what else could the Chinese possibly want?

According to U.S. Treasury Department data, China was by far the largest investor in long-term debt issued by U.S. government agencies, holding $376 billion as of June 2007, which is the latest figure available.

It isn't clear how much China has invested in debt issued by Fannie and Freddie alone.

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