Wednesday, August 06, 2008

More transparency, please

This Bloomberg story suggests that the Chinese called former Goldman Sachs CEO, and current Treasury Secretary Henry Paulson to ask if the US Government would back up Fannie Mae and Freddie Mac. Fannie and Freddie's government guarantee has always been informal, so I guess Paulson was asked to make things a little more formal. He dutifully did so, and the two entities have full access to the Federal printing presses.

If the US reneged on Agency paper, it would be like it reneging on it's own sovereign debt (which may happen, in due course). That's the thing about privatizing gains and socializing losses -- there's something in it for everyone.


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