Posted on 02/23/2011 5:40:06 PM PST by DeaconBenjamin
Confidential diplomatic cables from the U.S. embassies in Beijing and Hong Kong lay bare China's growing influence as America's largest creditor.
As the Federal Reserve grappled with the aftershocks of financial crisis, the Chinese suffered huge losses from their investments in American financial firms -- from Lehman Brothers to the Primary Reserve Fund, the money market fund that broke the buck.
Escalating Chinese pressure prompted a procession of soothing visits from the U.S. Treasury Department. In one striking instance, a top Chinese money manager directly asked Treasury Secretary Timothy Geithner for a favor.
In June 2009, the head of China's powerful sovereign wealth fund met with Geithner and requested that he lean on regulators at the U.S. Federal Reserve to speed up the approval of its $1.2 billion investment in Morgan Stanley, according to the cables, which were provided to Reuters by a third party.
Although the cables do not mention if Geithner took any action, China's deal to buy Morgan Stanley shares was announced the very next day.
China is America's biggest foreign lender, playing a crucial role in the U.S.Treasury auctions that allow Washington to borrow what it needs to keep its government running. At the same time, the United States is China's top export destination: America's trade deficit with the nation reached a record $273.1 billion in 2010. Most economists describe the two economies as co-dependent.
The concern in certain influential Washington and Wall Street circles is that Beijing would leverage its position as the main enabler of U.S. overspending. And the cables provide a glimpse into how much politics inform relations between the world's two largest economies.
One cable cites Chinese money managers expressing concern that U.S. arms sales to Taiwan -- a major, longstanding irritant in the relationship -- could sour the Chinese public on Treasury purchases.
(Excerpt) Read more at reuters.com ...
China can squeeze us because we’ve been financially irresponsible...
Folks, here is the origin of why TARP was rammed through.
We are so far up China’s a** it will be virtually impossible to extricate ourselves.
I better keep my mouth shut over that pic. Could get banned.
You mean TARP was pushed through so those butt wipes on wall street would not be raising rice in china???
Geither seen on lower part of photo.
I’m suspicious if this is the whole story, but this goes a long way to explain the panic to pass TARP.
Suppose it were not a sovereign fund. How can you prevent anybody with billions of dollars from exerting preassure? I think ther correlation is strained and spurious here.
Yep. And the second reason was the Martians' lending at the North Pole. What planet do you live on? Chinese had nothing to do with TARP; it's a purely American doing.
And bailing out numerous brokerage houses, mortgage lenders and banks where the Chinese had their money invested had nothing to do with it either.
No it does not. What bailouts were designed to do is to prevent a run on the banks with an ensuing collapse of the system. At that point, it did not matter whose money was invested and were. You and I may condemn those measure, but we have to understand what those measures were designed to do.
You are also factually incorrect. The Chinese did not have investments in banks and brokerage houses. You should worry a lot more about Arabs in this regard (a huge investment in Citi, for instance). The Chinese were buying Treasure bonds. Please keep your facts straight.
“......lean on regulators at the U.S. Federal Reserve to speed up the approval of its $1.2 billion investment in Morgan Stanley....”
Last time I checked, Morgan Stanley is and investment house.
Last time I checked, Morgan Stanley is and investment house.
So what does that prove?
Even if the allegations were true --- the only "evidence" here is that two people were in one room at the same time, a typical conspiratorial nonsense --- the article itself alleges that this happened in June 2009.
The bailout happened much earlier. At that time: (i) the objective was to prevent the runs on the banks and nothing else, no matter who owns them, and (ii) Chinese did not have (much of) an investment in equities here. That's what I said, and there is no contradiction.
For your information: $1.2B is a lot of money for you and me, but it is still peanuts when we talk about Chinese. They hold hundreds of billions in U.S. treasuries.
American companies, including the Wall Street, are owned by Main Street --- ordinary Americans, especially retirees, widows and orphans --- not by Chinese.
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