So Where Are The Bailout Funds Coming From?

In case you were wondering who was going to foot the bill for the last ten days worth of rescues, bailouts, takeovers, liquidity infusions, et al, the answer is…. CHINA:

From the U.S. Treasury:

Washington - The Federal Reserve has announced a series of lending and liquidity initiatives during the past several quarters intended to address heightened liquidity pressures in the financial market, including enhancing its liquidity facilities this week.  To manage the balance sheet impact of these efforts, the Federal Reserve has taken a number of actions, including redeeming and selling securities from the System Open Market Account portfolio.

The Treasury Department announced today the initiation of a temporary Supplementary Financing Program at the request of the Federal Reserve.  The program will consist of a series of Treasury bills, apart from Treasury’s current borrowing program, which will provide cash for use in the Federal Reserve initiatives.

Announcements of and participation in auctions conducted under the Supplementary Financing Program will be governed by existing Treasury auction rules.  Treasury will provide as much advance notification as possible regarding the timing, size, and maturity of any bills auctioned for Supplementary Financing Program purposes.

I know, I know, it’s not an explicit statement of their intent to just borrow money from China, but let’s not forget who is pumping money into our economy via buying bonds from our Government: China, Japan, South Korea and other foreign investors.

It’s kind of funny that our government is reviewing SWF investments into American companies in need of cash, when they’re just going to turn around and sell bonds to those some governments to finance government-led bailouts and rescues.

Sources:

U.S. Department Of The Treasury: “Treasury Announces Supplemental Financing Program” — September 17, 2008.

Posted in Categories: Contributor, Economy, External Research, Japan, USA.

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