The bailout of Fannie and Freddie was in part a response to pressure from foreign creditors, who will have growing influence over US financial policies.
Wednesday, September 10, 2008 at 10:57PM Foreign central banks, which had been among the biggest holders of Fannie and Freddie debt securities, were reducing their holdings and "advising" US government officials that they wanted something done to make their investments more secure, according to the Wall Street Journal and other sources. Like Russia, Indonesia, South Korea, Thailand, Brazil, and others before, US financial policy flexibility is now significantly constrained by the need to maintain the support of foreign creditors. We got into this spot by borrowing from them in order to run huge trade deficits year after year. Perhaps they will lend us more if we follow their "advice" and if that continues to meet their domestic needs and geopolitical aspirations. Or maybe they will cut our credit cards into little pieces. These are uncertain and not very hopeful times. Mark Thoma collects commentary and analyses and provides useful links here.
Reader Comments (1)
Roger, did you see Roger Cohen's piece in today's NYT...the 7th day? It also comments on selling the US to foreigners. It made me very sad.