Comments on: The US placed about $1.3 trillion of Treasuries with non-Chinese investors in 2008 http://blogs.cfr.org/setser/2009/01/24/the-us-placed-about-13-trillion-of-treasuries-with-non-chinese-investors-in-2008/ Thu, 14 Oct 2010 13:09:54 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Random Links XXXV « Random Musings of a Deranged Mind http://blogs.cfr.org/setser/2009/01/24/the-us-placed-about-13-trillion-of-treasuries-with-non-chinese-investors-in-2008/#comment-130096 Random Links XXXV « Random Musings of a Deranged Mind Fri, 08 May 2009 02:41:36 +0000 http://blogs.cfr.org/setser/?p=4551#comment-130096 [...] tariffs).  Given that a) import restrictions are stimulative for trade deficit countries; b) non-Chinese creditors – and perhaps even domestic US savings – may suffice to fund a somewhat more moderate [...] [...] tariffs).  Given that a) import restrictions are stimulative for trade deficit countries; b) non-Chinese creditors – and perhaps even domestic US savings – may suffice to fund a somewhat more moderate [...]

]]> By: don http://blogs.cfr.org/setser/2009/01/24/the-us-placed-about-13-trillion-of-treasuries-with-non-chinese-investors-in-2008/#comment-123698 don Thu, 29 Jan 2009 00:22:20 +0000 http://blogs.cfr.org/setser/?p=4551#comment-123698 Please note, a slip in decimal points in my last post. Please note, a slip in decimal points in my last post.

]]> By: ¿Apuesta Estados Unidos por la Gran Depresión II?, de S. McCoy en El Confidencial « Reggio’s Weblog http://blogs.cfr.org/setser/2009/01/24/the-us-placed-about-13-trillion-of-treasuries-with-non-chinese-investors-in-2008/#comment-123478 ¿Apuesta Estados Unidos por la Gran Depresión II?, de S. McCoy en El Confidencial « Reggio’s Weblog Tue, 27 Jan 2009 07:43:52 +0000 http://blogs.cfr.org/setser/?p=4551#comment-123478 [...] dicho, de lo que el propio Obama precisa a día de hoy, especialmente si uno tiene en cuenta que China sigue siendo, en términos absolutos, el principal financiador de lo que queda la voracidad inversora (ahora pública) [...] [...] dicho, de lo que el propio Obama precisa a día de hoy, especialmente si uno tiene en cuenta que China sigue siendo, en términos absolutos, el principal financiador de lo que queda la voracidad inversora (ahora pública) [...]

]]> By: don http://blogs.cfr.org/setser/2009/01/24/the-us-placed-about-13-trillion-of-treasuries-with-non-chinese-investors-in-2008/#comment-123444 don Tue, 27 Jan 2009 00:58:18 +0000 http://blogs.cfr.org/setser/?p=4551#comment-123444 I got the impression somewhere that much of the Treasury purchases in 2008 were caused by short term liquidity issues that were due to be reversed. As an offset, the fed got ($680 billion?) in foreign reserves. Does this make any sense? I got the impression somewhere that much of the Treasury purchases in 2008 were caused by short term liquidity issues that were due to be reversed. As an offset, the fed got ($680 billion?) in foreign reserves. Does this make any sense?

]]> By: credulous_prole http://blogs.cfr.org/setser/2009/01/24/the-us-placed-about-13-trillion-of-treasuries-with-non-chinese-investors-in-2008/#comment-123425 credulous_prole Mon, 26 Jan 2009 23:00:57 +0000 http://blogs.cfr.org/setser/?p=4551#comment-123425 We can all thank the GCC for the financing... note recent nuclear deals in the region. We can all thank the GCC for the financing… note recent nuclear deals in the region.

]]> By: Twofish http://blogs.cfr.org/setser/2009/01/24/the-us-placed-about-13-trillion-of-treasuries-with-non-chinese-investors-in-2008/#comment-123341 Twofish Mon, 26 Jan 2009 09:00:08 +0000 http://blogs.cfr.org/setser/?p=4551#comment-123341 Indian Investor: Could you elaborate a little on this, Twofish? My understanding is that the Fed’s balance sheet and its assets prior to the crisis weren’t large enough to extend that amount of credit in cash. The Fed can create cash. Someone goes into a Federal Reserve Bank with collateral, and they come out with IOU's from the Federal Reserve Bank. These IOU's are often found as green pieces of paper that people carry around in their wallets. Indian Investor: If as you say so much credit was given in cash against bad mortgage loans and so on, where did the Fed get that cash from, in the first place. From the printing press in the back room. The Federal Reserve creates cash, that's its job. Indian Investor: Could you elaborate a little on this, Twofish? My understanding is that the Fed’s balance sheet and its assets prior to the crisis weren’t large enough to extend that amount of credit in cash.

The Fed can create cash. Someone goes into a Federal Reserve Bank with collateral, and they come out with IOU’s from the Federal Reserve Bank. These IOU’s are often found as green pieces of paper that people carry around in their wallets.

Indian Investor: If as you say so much credit was given in cash against bad mortgage loans and so on, where did the Fed get that cash from, in the first place.

From the printing press in the back room.

The Federal Reserve creates cash, that’s its job.

]]> By: Indian Investor http://blogs.cfr.org/setser/2009/01/24/the-us-placed-about-13-trillion-of-treasuries-with-non-chinese-investors-in-2008/#comment-123328 Indian Investor Mon, 26 Jan 2009 06:50:12 +0000 http://blogs.cfr.org/setser/?p=4551#comment-123328 Twofish: No they didn’t. With the occasional exception such as the Bear Stearns bailout, the banks got cash in which mortgage securities were pledged as collateral. If those securities turn out to be bad, then the banks are still on the hook. Could you elaborate a little on this, Twofish? My understanding is that the Fed's balance sheet and its assets prior to the crisis weren't large enough to extend that amount of credit in cash. If as you say so much credit was given in cash against bad mortgage loans and so on, where did the Fed get that cash from, in the first place? This is why I think it's more reasonable to think that the Treasury issued all the securities and the proceeds were given to the Fed, to be given to the banks in turn. Also you may have a situation where the banks used the cash to buy more Treasury securities, with the money spinning between Washington and New York like a wooden top in good old Bengaluru. Twofish:
No they didn’t. With the occasional exception such as the Bear Stearns bailout, the banks got cash in which mortgage securities were pledged as collateral. If those securities turn out to be bad, then the banks are still on the hook.

Could you elaborate a little on this, Twofish? My understanding is that the Fed’s balance sheet and its assets prior to the crisis weren’t large enough to extend that amount of credit in cash.
If as you say so much credit was given in cash against bad mortgage loans and so on, where did the Fed get that cash from, in the first place? This is why I think it’s more reasonable to think that the Treasury issued all the securities and the proceeds were given to the Fed, to be given to the banks in turn. Also you may have a situation where the banks used the cash to buy more Treasury securities, with the money spinning between Washington and New York like a wooden top in good old Bengaluru.

]]> By: Twofish http://blogs.cfr.org/setser/2009/01/24/the-us-placed-about-13-trillion-of-treasuries-with-non-chinese-investors-in-2008/#comment-123325 Twofish Mon, 26 Jan 2009 06:40:07 +0000 http://blogs.cfr.org/setser/?p=4551#comment-123325 Indian Investor: When I write “private bank”, I’m mostly referring to those that are functioning as primary dealers for the Treasury Securities. Since all of them are public traded corporations, I don't see how you can call them "private banks" except that they aren't owned by the government. A lot of them were "private" until the 1990's, and personally I think that turning investment banks into publicly traded companies instead of general partnerships may have been a huge mistake. The reason why is that in a general partnership, the partners are personally liable for losses of the partnership. As joint-stock corporations, this isn't true. Indian Investor: When I write “private bank”, I’m mostly referring to those that are functioning as primary dealers for the Treasury Securities.

Since all of them are public traded corporations, I don’t see how you can call them “private banks” except that they aren’t owned by the government. A lot of them were “private” until the 1990′s, and personally I think that turning investment banks into publicly traded companies instead of general partnerships may have been a huge mistake.

The reason why is that in a general partnership, the partners are personally liable for losses of the partnership. As joint-stock corporations, this isn’t true.

]]> By: Twofish http://blogs.cfr.org/setser/2009/01/24/the-us-placed-about-13-trillion-of-treasuries-with-non-chinese-investors-in-2008/#comment-123322 Twofish Mon, 26 Jan 2009 06:34:45 +0000 http://blogs.cfr.org/setser/?p=4551#comment-123322 Pearson: I think there’s much to be gained by recognizing all relevant obligations created by the U.S. government as part of its “financing need”. This should include any estimate of GSE, FDIC and FHLB losses. FDIC and FHLB yes. GSE, maybe. One thing that has come out of this is that it is now clear that GSE obligations do not carry the full faith and credit of the US government. Something that is messy now is that it's even murkier that it was before what is or isn't a Federal obligation. The problem is that without a crystal ball that can tell the future, it's really impossible to know what the FDIC, FHLB, and GSE losses are, all you can do is to get range and best/worst case estimates. Personally, I think that a "de-facto nationalization" of the banking system is highly likely at this point. They might not call it a nationalization, but it will effectively be one. I think the reason everyone in Washington has suddenly become quiet is that they are working out the details and trying to figure out what happens next. Pearson: I think there’s much to be gained by recognizing all relevant obligations created by the U.S. government as part of its “financing need”. This should include any estimate of GSE, FDIC and FHLB losses.

FDIC and FHLB yes. GSE, maybe. One thing that has come out of this is that it is now clear that GSE obligations do not carry the full faith and credit of the US government. Something that is messy now is that it’s even murkier that it was before what is or isn’t a Federal obligation.

The problem is that without a crystal ball that can tell the future, it’s really impossible to know what the FDIC, FHLB, and GSE losses are, all you can do is to get range and best/worst case estimates.

Personally, I think that a “de-facto nationalization” of the banking system is highly likely at this point. They might not call it a nationalization, but it will effectively be one. I think the reason everyone in Washington has suddenly become quiet is that they are working out the details and trying to figure out what happens next.

]]> By: Indian Investor http://blogs.cfr.org/setser/2009/01/24/the-us-placed-about-13-trillion-of-treasuries-with-non-chinese-investors-in-2008/#comment-123321 Indian Investor Mon, 26 Jan 2009 06:28:47 +0000 http://blogs.cfr.org/setser/?p=4551#comment-123321 @Twofish: When I write "private bank", I'm mostly referring to those that are functioning as primary dealers for the Treasury Securities: Goldman Sachs, Citigroup, Morgan Stanley, Bank of America (JP Morgan?). As you can see, these are the ones still left standing. You're right in your insight that since all this info is public, some pretty good lawyers would have been hired to go through all those usb clauses and find a loophole that makes it legal to do it. @Twofish:
When I write “private bank”, I’m mostly referring to those that are functioning as primary dealers for the Treasury Securities:
Goldman Sachs, Citigroup, Morgan Stanley, Bank of America (JP Morgan?). As you can see, these are the ones still left standing.
You’re right in your insight that since all this info is public, some pretty good lawyers would have been hired to go through all those usb clauses and find a loophole that makes it legal to do it.

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