Foreign Sovereign Funds Turn Their Backs On The GSEs

Reuters reports the sovereign wealth fund of Kuwait, the KIA, will not be buying any more GSE debt. Exactly what Bernanke and Paulson were attempting to avoid last week, when they rushed to reassure the world the Fannie Mae and Freddie Mac debacle would not hurt investors, just happened.

Great…just great.

This is truly bad news and most likely you’ll never hear about it the main stream media.

Foreign Capital - GSE Life Blood

Everything in our government and private sector is based on credit and liquidity. Our ability to attract and keep foreign investors willing to put their capital at risk in the US is our life-blood.

Blood, if we don’t get it, we die. Like blood, if the GSEs don’t get capital from somewhere, they die.

Where did Fannie Mae and Freddie Mac get capital in the past?

They got it from all the central bankers and sovereign funds all over the world. If this KIA decision goes viral, you might as well turn the lights out on the GSEs and the US economy.

Paulson and Bernanke know this…and that’s why they ran to the TV cameras on Sunday night a week ago trying to stave off this exact occurrence. It’s only been a week and although the dynamic duo are trying to reassure those with the capital who allow us to spend what we don’t have, it didn’t seem to be enough for Mustapha al-Shamali, Kuwait’s Finance Minister.

President Bush keeps telling us the Saudi’s are our friends…I always assumed since we “liberated” Kuwait from Sadam Hussen’s invasion, they were too.

You don’t kick a man when he’s down, and you certainly don’t do it to a “friend”.

Saudi Arabia - Friend or Foe?

Folks we are down…if Saudi Arabia kicks us like Kuwait just did…we’ll all, including President Bush, have to reevaluate the meaning of the word “friend”.

The US transfers $700 Billion a year in oil purchases to Arab Nations and I can understand when President Bush gets rebuffed when asking for a lowering of the price. The Sheiks can’t justify it at home.

But when we need a little financial support that could be done without any fanfare…why not?

Could it be the Financial Minister of Kuwait knows the full width and breath of the mortgage crisis…and he sees it has “wasted money”? Like giving a junkie $20…he’s just gonna be back tomorrow…so what’s the point?

God I hope not…