Foreign central banks own 60% of Fannie & Freddie Debt

I think that this will collapse the bond market regardless of whether they actually put it on the books. The implied guarantee is too well understood by the financial community. The government can always change its obligations on SS and Medicare. Those are not contractual.  They are legislative, and more importantly, they are not owed to Wall Street, its friends, and even more, to foreign central banks. FCBs hold 60% of the debt of Fannie and Freddie.  Wall Street expects the government to stand behind Fannie and Freddie, and it is beginning to believe, rightly I think, that this will break the finances of the US government. In fact they are already broken, and the point of recognition is here and now. I look for interest rates on US government securities to be much higher a year from now, perhaps unimaginably so.

Jetlag, Jul 12 2008, 05:35 AM