The US Treasury Gave $10bn (and Maybe More) to China

Sound crazy? It's not. With $375bn of GSE debt holdings, a back of the envelope calculation says the Chinese government's portfolio of bonds will make $10bn this morning.

Someone on Wall Street should do a research piece calculating the amount that GSE bonds made from Friday night to Monday morning. My guess would be that the number would be north of $100bn, with most of that money going to foreign central banks. If the US government insists on doing taxpayer bailouts, I wish they would at least have the courtesy to bail out Americans.

With all this chatter about wiping out shareholders (who were already down 90%), everyone forgets to mention that bond holders are raking it in.

Comments

[phdinsuntan...:]

first thing with sense I read today

2008 Sep 08 10:07 AM

[SilverLeaf:]

So much for moral hazard, huh?

2008 Sep 08 11:23 AM

[Feng:]

I am not sure if the author has problem with bond holder, or China government.

Every investor understand (or should) the risk and rewards of Fannie and Freddie's bond and stock. Some people bet government bail out, therefore chose to invest in Bond. Some people bet no government bail out, and chose to speculate in Stock. It was a fair game. Complaining the gain of bond owner is pathetic.

If you don't have problem with Bond owner in general, but just have problem with China government because they are not american, then maybe you should ask your government to forfeit all corporate and treasure bonds owned by China government? They are the bad guy anyway, and default on the bad guy is always justified?

Just as Silver leaf put it, "So much for morale hazzard"!!!

2008 Sep 08 11:51 AM

[Jason Rines...:]

I have no issue with the Chinese government, I have issue with our's Feng for being indebted to it at this level. That is a problem 'Americans' will certainly deal with and hopefully Lady Liberty and the Dragon can do good business in the future, although my gut tells me it will get ugly for a time. For ordinary Americans, many have now come to understand the Chinese saying 'eating bitterness'.

2008 Sep 08 12:30 PM

[mcadoo3312:]

At this point, both countries have too much to lose in having bad relations. On par with all comments so far though, America has more to lose than China. What is alarming right now though, is that there is very little incentive for anyone to buy our debt, so it is going to get more expensive and put us further in the hole. Let's just hope they do not try to cash out, because then that hole will end up being our grave.

2008 Sep 08 03:30 PM

[thaicat:]

Well, before you finish calculating this week's gift from the US treasury, I suggest you add up all of the benefits provided by the People's Bank of China to the US government and consumer the past few years. Since their purchases of our bonds has helped keep interest rates lower, the value flowing into US pockets is considerably higher. Just made our unregulated spending frenzy a little cheaper until it collapsed. To Concerned Americans in general, if you don't like this equation, change your behavior instead of whining about it.

2008 Sep 09 05:13 AM

[DonaldRay:]

Okay, so, buy bonds.

2008 Sep 09 10:33 AM

[huangthomas:]

I believe the title of the post is a light-hearted one. No need to take it seriously. American profligacy is at the heart of the problem. China and oil producing countries recycle the US$ to support American life style with low-interest loan. We all enjoyed it, until the housing bubbles burst and drunken wall street bankers intoxicated with a CDO brand toxic brew collapsed on the street. It is not a pretty sight, but life goes on ....

2008 Sep 09 11:01 AM

[kotika98:]

they havent "made" any money, they just got some of their paper loss reduced.

2008 Sep 09 11:30 AM