Paulson claims Russia tried to foment Fannie-Freddie crisis

Russia proposed to China that the two nations should sell Fannie Mae and Freddie Mac bonds in 2008 to force the US government to bail out the giant mortgage-finance companies, former US Treasury secretary Hank Paulson has claimed.

The allegation is in his memoir On the Brink in which he also suggests that Alistair Darling, the UK chancellor, blocked a rescue takeover of Lehman Brothers by Barclays Bank when he refused to support special treatment by UK regulators.

“Russian officials had made a top-level approach to the Chinese, suggesting that together they might sell big chunks of their GSE holdings to force the US to use its emergency authorities to prop up these companies,” he said.

“The Chinese had declined to go along with the disruptive scheme, but the report was deeply troubling,” he said. A senior Russian official told the Financial Times that he could not comment on the allegation.

Separately, Mr Paulson makes it clear that he believes that Mr Darling prevented a takeover of Lehman by Barclays out of fear that it would endanger the UK bank.

Mr Paulson said that Mr Darling telephoned him on Friday September 12 – as the US authorities were scrambling to find a buyer for Lehman – to express concern about a possible Barclays deal. Mr Paulson said that he did not realise at the time that this was a “clear warning”.

This is hard to believe because the Alexei Kudrin forecasts expansion of Russian economy
Vice PM and finance minister Alexei Kudrin forecasts modest growth of the Russian economy in the near future. He pointed out that Russia will be quite stable if developed markets of the US and Europe provide fairly sustainable growth.

Kudrin noted that the current crisis in the global economy and financial stimulus measures are unprecedented. Therefore, in his opinion, it is hard to say how long the countries will be able to continue “such massive cash injections and how they will influence their balance sheets as early as a year or two”, including sovereign debts which, according to his estimates, will exceed the critical level even in developed countries, which could impact the capital market environment.

The minister emphasized that for the time being it is premature and difficult to talk about steady growth of the national economies. “Goods stockpiles are on the rise, but it’s hard to say we’re seeing sustainable growth,” the vice prime minister said.

Thier stockpiles look like trouble because they need a buyer. If we have to grow now how could they did not know that two years ago. Bear Stern had a roll in a meltdown in with policies of Russia who was in energy wars with George. So maybe they learned their lesson, or waiting for the next punch to someone

Paulson Says He Was Prepared to Guarantee Lehman - BL, 2010 January 29, by Michael McKee

Former U.S. Treasury Secretary Henry Paulson says in his memoir that he was prepared to support a government backstop to prevent the bankruptcy of Lehman Brothers Holdings Inc. until he learned the firm’s assets were so mis- marked it would have guaranteed a loss to taxpayers.
Going into a Sept. 12, 2008, meeting at the New York Federal Reserve Bank with the leaders of the largest Wall Street firms, Paulson and then-New York Fed President Timothy Geithner agreed that “if a Bear Stearns-style rescue was the only option, we would take it,” the ex-secretary wrote in “On The Brink.”
Although the book isn’t scheduled for release until Feb. 1, Bloomberg News purchased a copy at a New York bookstore. .....
“The toxic quality of Lehman’s assets would have guaranteed the Fed a loss,” Paulson 63, wrote, meaning the central bank couldn’t legally make a loan.
The U.K. government ultimately was responsible for forcing Lehman into bankruptcy, Paulson said. Lehman executives had reached a deal to sell the bank to Barclays Plc, a British bank, on Saturday, Sept. 13.
The same day, the chief executives of the other New York banks gathered at the New York Fed had agreed their firms would, along with Barclays, collectively finance the Lehman shortfall, Paulson said.
The group included Lloyd Blankfein of Goldman Sachs Group Inc., John Mack of Morgan Stanley, Jamie Dimon of JPMorgan Chase, Vikram Pandit of Citigroup Inc., Brady Dougan of Credit Suisse Group AG, and Robert Kelly of Bank of New York Mellon Corp. They agreed to backstop the deal even though under mark-to-market accounting rules, they would have to immediately recognize a $10 billion loss on the Lehman assets, he wrote.
The U.K. government, however, refused to waive a requirement that Barclays submit the deal to a shareholder vote, in spite of a personal plea by Paulson to Chancellor of the Exchequer Alistair Darling. Darling, Paulson wrote, was concerned that if Lehman’s bad assets hurt Barclays, it might affect the entire U.K. banking system.
“The British screwed us,” Paulson, a former chairman of Goldman Sachs, said he told the U.S. bankers the next day.
The former Treasury secretary said he, Geithner, and Fed Chairman Ben S. Bernanke were well aware the bankruptcy of Lehman would cause havoc in financial markets, although the consequences were much worse than they had anticipated. That was in part because Lehman’s U.K. bankruptcy receiver, PricewaterhouseCoopers, froze all of the firm’s accounts in that country, refusing to transfer collateral back to Lehman creditors, Paulson said.
Panicked investors then tried to withdraw funds from other financial institutions, including Morgan Stanley and Goldman Sachs, and credit markets froze. .....
Paulson also wrote that Chinese officials were very helpful during the crisis. He spoke often with Wang Qishan, vice premier of China’s financial and economic affairs, who pledged his country wouldn’t sell its large holdings of U.S. Treasury and agency bonds.
Russia tried to take advantage of the turmoil in U.S. markets, he wrote. While he was attending the Summer Olympic Games in Beijing in early August 2008, he learned that “top-level” Russian officials suggested to the Chinese that the two countries sell a large amount of the Fannie Mae and Freddie Mac bonds they owned in order to force the U.S. to bail out those firms. The Chinese refused, Paulson said. .....

This is hard to believe because the Alexei Kudrin forecasts expansion of Russian economy

Russia doesn't really have an "economy" in a real sense of the word, because Putin didn't diversify the Russian economy. In fact he made it even more consolidated and entirely dependent on commodities, which helps him temporarily to hold hostage and terrorize Europe, but that is as far as it goes :

Two-Speed Global Recovery On Display At Davos Gathering - CNBC, 2010 January 25, by Albert Bozzo

If you hear the word BIC in Davos this week, don’t think people are talking about the French pen company, although it may present a temporary but lucrative marketing opportunity.
When it comes to global growth this year, BIC will lead the way — Brazil, India and China, though probably in reverse order. (Forget BRIC, as Russia may not even emerge from recession in 2010 without a jump in oil prices, according to some economists.)
Developing Asia, Latin America and even the Middle East will also post above average growth rates with the weakest showings coming from Japan, Europe and the U.S. (in that order).
“This is shaping up to be a two-speed global recovery,” says Nariman Behravesh, chief economist at Global Insight, who’ll be among the 2,500 people at the World Economic Forum’s annual meeting in Davos, Switzerland Jan. 27-30.
"The emerging economies of Asia are certainly putting in a strong performance,” says Eswar Prasad, a former IMF economist now with Cornell University and The Brookings Institution. “They were strong in 2009 and they are likely to turn in an even stronger performance in 2010. The big question is whether this is going to be a sustainable performance because of domestic demand.”
That's a common assessment, from Wall Street economists to academics to NGOs, such as the World Bank, and may wind up being an important area of discussion at the event, whose main theme is the amorphous, "Rethink, Redesign, Rebuild." .....

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