Fannie and Freddie's quasi-rescue

When the Chinese saw the first reports on the rescue of Freddie Mac and Fannie Mae, they must have been elated. The Americans had recognised the seriousness of the US banking system crisis and had acted boldly. The enormous investment the Chinese have in the loan stock of the two mortgage insurers was “safe” – the Chinese would do well.

Then the potential long-term danger of the situation unfolded. It was not a full rescue but a “quasi rescue”. Alan Kohler explained how it works earlier today (Unambiguously in Crisis, September 8).