Chapter 2708 We Are Still Strong

Watching Feng Yiping coming over with a smile on his face, Paulson's mood was not good. He did not expect that no matter the former king of Wall Street or the current finance chief of the richest country in the world, he could still feel jealous.

But he really couldn't help being jealous.

Whether it was when he went to China yesterday and saw the lights and decorations everywhere in China, a joyous scene, or when he met with Chinese officials later, they looked calm and thought the situation was still very good, and the guy in front of him, who had easily earned at least 20 billion US dollars by borrowing subprime loans and was smiling at this time...

All of these made Paulson feel extremely jealous, just like those guys who could only celebrate Double 11, watching those couples who went to the restaurant to book a table for the Chinese Valentine's Day yesterday.

"Vera," Feng Yiping shook the hand of Paulson's one-year-old granddaughter, "I say, what is there to worry about? Whether it is Freddie Mac or Fannie Mae, they have brought this situation to this point, it is all their own fault,"

Paulson did not directly agree with Feng Yiping's statement. He handed the granddaughter in his arms to his wife and patted the beacon tower. "The model of the two housing agencies has always been problematic,"

Feng Yiping comforted him casually, "Those are all old problems,"

The model of the two housing agencies is indeed problematic.

To be honest, issues such as housing that are closely related to people's livelihood are issues that every government pays great attention to.

The demand for housing is also a common demand of all people in all countries. In the United States, having a house is an important part of the American dream.

But a common problem in all countries is that there will always be a considerable number of people who have the need to buy housing, but cannot afford the related high expenses.

Many countries have measures such as affordable housing and low-rent housing for this purpose, but the United States' approach is somewhat unique. They hope to solve the problem through financial institutions.

The original intention of establishing Fannie Mae and Freddie Mac was to allow most American people to borrow housing loans at lower interest rates and more easily.

The biggest difference between the two housing agencies and private banks in the United States is that they are actually semi-state-owned, so their financing costs are lower than those of the banks with the best credit, so they can indirectly provide low-interest loans for ordinary people to buy houses with mortgages - this is actually equivalent to the US government providing subsidies for low-income groups to buy houses (I have to praise them in this regard, look at us, big banks are all state-owned, but low-income families buy houses at low interest rates, what daydreaming?)

There are indeed many things worth praising about this plan. More Americans own their own homes - more than 70% of Americans own their own homes, which makes the American dream more attractive; and after buying a house, in order to repay the loan, many people have to work harder - this can effectively promote economic development... It's really a good thing to kill many birds with one stone.

But one problem is that Fannie Mae and Freddie Mac are not state-owned enterprises after all, so after subsidizing ordinary people to buy houses, the remaining profits naturally belong to shareholders.

This is why Paulson said that the model of the two housing agencies was originally problematic.

Pure state-owned enterprises will find ways to enjoy profits, such as various luxurious buildings, various luxurious decorations, and various luxurious consumption... Not to mention that from a legal perspective, the two housing agencies are privately owned companies.

As government supervision is gradually relaxed, the two housing agencies have gradually become more active. In order to create more profits, they will come up with various ways to generate income.

Like all their counterparts on Wall Street, they design various complex investment portfolios to invest and various complex products to sell. Because of the implicit guarantee of the US government, they are more unscrupulous than Wall Street investment banks in the use of leverage.

In short, at the end of last year, the total assets of the two housing agencies were only more than 80 billion US dollars, but the total amount of assets and guarantees they held exceeded 5 trillion US dollars, with a leverage of more than 60 times.

Such high leverage means that if there is a problem with 1.5% of the mortgages and investments they guarantee, their more than 80 billion US dollars of capital will be instantly wiped out.

But given the current state of the US real estate market, the problem is not only 1.5%, but also more than 15%. The current deficit of the two housing agencies is at least trillions of dollars, so Paulson is so worried.

This number would be a headache for anyone.

Last month, the problems of the two housing agencies were already very critical, so Paulson and his team had to explicitly guarantee the debts of the two housing agencies and announced that they would provide them with further discounts.

But this only temporarily saved the two housing agencies. The assets they hold are still depreciating, and their stock prices are still falling... While they cannot generate blood themselves, if they continue to lose blood like this, they will also be dead.

"But it's not difficult to solve it, isn't it? The results of Bear Stearns are very good," Feng Yiping continued.

Paulson really wanted to choke Feng Yiping, you are talking without any pain.

The result of Bear Stearns is essentially that the shareholders of Bear Stearns ended up with nothing, but the rights of creditors such as Feng Yiping were effectively protected.

Such a helpless plan is of course a plan of great sin. If the same thing is done to the two housing agencies, Paulson feels that they will have to worry about their own personal safety.

As an outsider, Feng Yiping was of course very relaxed. "The plan is very simple. When necessary, the government will invest in the two housing agencies and appoint a new management team to ensure that government investment and bonds held by foreign investors have a higher repayment priority than common and preferred stocks."

"In this way, the problem will be solved naturally."

The core is still to ignore the interests of the shareholders of the two housing agencies.

Paulson suddenly asked, "Feng, tell me, are you also shorting the two housing agencies?"

Feng Yiping shook his head, "I have never been involved in the specific operations below,"

Of course there is shorting.

Now that their fund has such a strong background and has such a good relationship with people related to the US government, it will only be better when Obama takes office next year. Knowing that the stock prices of the two housing agencies will definitely fall sharply, why not short?

He likes to make such quick money in the United States.

So he is not really an outsider. He made Paulson determined to adopt such a plan in order to ensure future profits.

He met Paulson's meaningful gaze and asked, "But if you were in charge of Goldman Sachs, what would you do in this situation?"

Paulson was speechless. Of course, he would short sell without hesitation, so this shows that Feng Yiping and others must be doing this.

"Frankly speaking, I don't think there is anything to hesitate about on this issue," Feng Yiping continued mercilessly, "Let go of the two housing agencies? No, let alone the current situation, even when there is no such systemic risk on Wall Street, we can't afford such consequences,"

"At the same time, will those foreign investors who hold a large number of two housing agencies' bonds allow the bonds in their hands to become waste paper? You know, that's not a small number,"

Paulson was even more worried. This was also an important part of his talks with the Chinese side. He hoped that China would not sell off the two housing agencies' bonds at this juncture. We are the largest buyer of two housing agencies' bonds.

But the Chinese side hopes that they can make a clear commitment to guarantee the safety of the bonds they hold.

The worse news is that Russia is believed to have proposed to China that in order to ensure the safety of assets, they should jointly sell some bonds to prompt Americans to take action.

If they really did that, not to mention that the US financial institutions that also held Fannie and Freddie bonds would collapse one after another, overseas investors who held a large amount of Fannie and Freddie bonds would definitely withdraw their capital from the United States after suffering such losses, which would mean a comprehensive collapse of the US dollar asset price... That would be truly irreparable.

In other words, there was really no choice but to offend people, and to offend them to death.

Paulson lowered his head again, and Feng Yiping shouted, "Be careful," but it was too late.

The head of the US Treasury Secretary had a close contact with the thousand-year-old bricks on our Great Wall.

It was still a very close one, because Feng Yiping saw that Paulson's head was bleeding (true story).

But in front of your granddaughter, could you not shout so loudly?

Seeing the US Treasury Secretary covering his bleeding head and shouting, the accompanying officials hurriedly ran up and surrounded him in panic.

Some of us couldn't help but cast admiring eyes at Feng Yiping next to him. Just chatting could cause the US Treasury Secretary to hurt his head. Feng Yiping is worthy of it!

Looking at the way they were looking at him, Feng Yiping opened his eyes wide with innocence and said, "What are you thinking about? It has nothing to do with me!"