2007-07-19

Pushing Ginnie Mae to China (當中國系水魚)



Related: from Big Picture

US teaches the Chinese Capitalist Party Economics 101:

  • "Mortgage-backed securities yield a higher rate of return than a traditional U.S. Treasury bond with [the] same credit risk," U.S. Department of Housing and Urban Development Secretary Alphonso Jackson said.
Mr. Jackson must have thought that with the GFW China is not aware of the housing bubble and the sub-prime problems in US, and that all the Chinese who understands the relationship between risk and return are already hired by Goldman Sachs or Morgan Stanley. Or is the 'credit risk' Mr Jackson referred to a different concept from what we would normally refer to as 'risk'?

Anyway, this is the most entertaining piece of news of the day.

Related
1) Michael Sesit of Bloomberg wrote about takeover hypocrisy.
2) look at the charts there.

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China Is UrgedTo Invest MoreIn Ginnie Mae (WSJ)

By AARON BACKJuly 16, 2007

BEIJING -- U.S. Department of Housing and Urban Development Secretary Alphonso Jackson Friday encouraged China to increase its investments in mortgage-backed securities in the U.S., especially Ginnie Mae securities, which are fully backed by the U.S. government.

"Mortgage-backed securities yield a higher rate of return than a traditional U.S. Treasury bond with [the] same credit risk," Mr. Jackson said.

The Government National Mortgage Association, or Ginnie Mae, is a U.S. government-owned corporation. It issues mortgage-backed securities that are fully backed by the U.S. Treasury.
China is seeking to earn a higher return on its massive foreign-exchange reserves, which reached $1.33 trillion at the end of June. Beijing is in the process of creating an agency that will invest $200 billion of those reserves in higher-yielding assets overseas.

China has invested its reserves mainly in U.S. Treasury bonds, and that has helped to keep down U.S. interest rates, making housing and other loans more affordable.

According to U.S. housing-department figures, Chinese investors held less than $3 billion in U.S. mortgage-backed securities in June 2003, but by June 2006 that number had risen to $107.5 billion. The June 2006 total includes securities issued by Ginnie Mae and those issued by the Federal National Mortgage Association, or Fannie Mae, and the Federal Home Loan Mortgage Corp., or Freddie Mac, which are overseen by the Department of Housing and Urban Development but not backed by the U.S. Treasury.

Figures weren't available on what portion of the securities held by China are issued by Ginnie Mae, but Mr. Jackson said "we have not been a major player in that area."

Mr. Jackson was speaking to reporters during a visit to China, where he met government officials, including the heads of the People's Bank of China and the Ministry of Construction.

2 comments:

bobby fletcher said...

I think you've pointed out the unspoken economic servitude China is uder with US.

They work their citizens to the bones as cheap labor, while we own signficant percentage of China's domestic production.

Then they pump the money back into US by buying our technically worthless T-bills. Or in this case take a hint and help us relieve the sector-specific problem like sub-prime mortgage falling on its face (and no one is touching it with a 10 foot pole.)

What a deal, makes me proud to be an American.

老麦 said...

真是一个厚颜无耻的仆街!!

I wish I'd live long enough to witness the downfall of USA.