US Begs China to Buy Subprime Mortgages

Dateline May 23 2007.
Statement by HUD Secretary Alphonso Jackson On His Participation In The U.S. - China Strategic ECOMOMIC DIALOGUE.

Mish Note: ECOMOMIC? The HUD could not even manage to spell economic correctly in their News Release.

"The U.S.-China Strategic Economic Dialogue taking place in Washington over the past two days has been very constructive. Discussing the mutual benefits of the growing connectivity between the economies of our two countries is an important topic. One statistic in the financial marketplace bares this out most of all: In 2002, the total Chinese investment in U.S. agency mortgage-backed securities was just over $100 million. By June 2006, this number had grown to over $107 billion -- a nearly 1,000-fold increase in less than 5 years.

The Chinese economy is benefiting from high-yielding, safe investments in U.S. mortgage-backed securities. Here at home, American homeowners are benefiting from lower interest rates on mortgage loans resulting from greater Chinese demand for these securities. It's a win-win for the U.S. and China and our peoples, and I look forward to further discussions with my counterpart when I travel to China to talk about integration of our capital markets."

Ginnie Mae mortgage-backed securities are backed by the full faith and credit of the U.S. government. The Ginnie Mae guarantee means investors will always receive timely payment of principal and interest due on the securities they hold. The full faith and credit guarantee makes Ginnie Mae one of the safest investments one can make.

Click here for a short summary of "Foreign Holdings of Agency Mortgage-Backed Securities."

By clicking "here" one is directed to the following bait and switch table.
Click on chart for a better view.



The red box at the bottom says "Agency MBS includes securities guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae"

Only Ginnie Mae is backed by the US government. Fannie Mae and Freddie Mac are not. The latter two dwarf Ginnie Mae by orders of magnitude. Foreign governments investing in US agencies in general on the basis of a US government guarantee are being ripped off.

Dateline July 13 2007

Hud Secretary Alphonso Jackson begs China to buy more mortgage-backed securities.

The U.S. is urging China's central bank to buy more mortgage-backed securities after a surge in defaults by risky borrowers in the world's largest economy eroded demand for such instruments.

"It's not a matter whether they're going to do more business in mortgage-backed securities, it's who they're going to business with,'' U.S. Department of Housing and Urban Development Secretary Alphonso Jackson told reporters in Beijing. He met with central bank Governor Zhou Xiaochuan and Minister of Construction Wang Guangtao in the nation's capital this week.

The U.S. housing regulator is seeking to tap China's $1.33 trillion of foreign-currency reserves after surging defaults on subprime mortgages caused the near-collapse last month of two hedge funds run by Bear Stearns Cos.

Ginnie Mae is "in a better position than most'' to offer mortgage products since, unlike Fannie Mae and Freddie Mac, it has the full backing of the U.S. government, said Jackson. Mortgage securities offer China's central bank better returns than U.S. Treasury bonds at the same level of credit risk, he said. China held $414 billion in U.S. Treasuries as of April, according to data compiled by Bloomberg.

HUD also plans to approach Chinese commercial banks such as China Construction Bank Corp. and ask them to buy mortgage securities, said Jackson.

The housing department wants to sign a memorandum of understanding with construction minister Wang when he visits the U.S. in August, Jackson said without elaborating. The two nations face similar challenges in providing affordable housing to average citizens, he said.

The US government has no business pimping mortgages. That should be the role of private enterprise. Alphonso Jackson and the Hud is one of many reasons we created a bubble in housing. See Please - No More Help! for additional problems caused by government "help".

For more on Alphonso Jackson, please check out Should the government sell bread, orange juice, or mortgages?

Housing and Urban Development Secretary Alphonso Jackson has a message to sub-prime lenders: "We need to reach out" to African-American, Hispanic and other first-time buyers with better loan concepts, more flexible guidelines and quicker service, said Jackson in an interview. "I am absolutely emphatic about winning back our share of the market that has slipped away to subprime lenders."

Excuse me! Since when is it the business of the federal government to "win back" market share on housing loans? How is this any different that the federal government opening up bakeries to compete against the outlandish price of bread by private bakeries?

Note the date on that blog entry: May 18th 2005. Right at the tip top of the housing bubble, the Hud wanted to "win back market share that has slipped away to subprime lenders". Fast forward 2007... The same clown is now pimping his wares to China. Sheeesh.

The HUD should be abolished and if Ron Paul was elected I am quite sure it would be.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/