Another Milepost On The Road To Oblivion

Fannie Mae and Freddie Mac debt? No longer acceptable to Asian investors without full faith and credit guaranteed payback.

The risks are too great without a pledge that the U.S. will repay the debt no matter what, according to Hideo Shimomura, chief fund investor in Tokyo for Mitsubishi UFJ Asset Management Co., and other bondholders and analysts in Japan, China and South Korea interviewed by Bloomberg. Overseas resistance may hamper U.S. efforts to hold down home-loan rates and shore up the nation’s largest mortgage-finance companies.

Even after President Barack Obama vowed on Feb. 18 to sink as much as $400 billion of capital into Fannie Mae and Freddie Mac, double the original commitment, “there is still a concern that there is no guarantee” from the government, said Shimomura, who oversees $4 billion in non-yen bonds for the arm of Japan’s largest bank.

“Looking at the risk, they’re not so attractive,” he said. “We need a guarantee before we’ll buy.”

You see, if the guys holding all our debt as a nation become convinced we'll never pay them back...they'll start selling off that debt. Fast. In a f'ckin tsunami. In a f'cking tsunami that will pretty much turn the dollar into a third world currency overnight.

This would be one of those Bad Things You Hear About. I expect some sort of guarantee before the end of the week on Fannie and Freddie debt.