China and the Bailout

Were you aware that the People’s Republic of China put pressure on the United States that helped push through the bailout plan? Neither was I. And yet when I googled “china bailout” a few minutes ago, I found very few stories that talked about the pressure that China put on the United States government and that they demanded payment.

In this first video, Congressman Peter DeFazio (D-Oregon), said in the midst of negotiations:

There is a tremendous amount of pressure being put on by some very powerful creditors and one of them happens to be the People’s Republic of China who owns a lot of this junk and they want their money back or they’re threatening us.

In this second video clip about the bailout, Congressman Brad Sherman (D-California) made reference to China and other foreign creditors on CNBC:

Hundreds of billions of dollars are going to bailout foreign investors. They know it. They’ve demanded it. And the bill has been carefully written to make sure that can happen.

In this last video clip,  Congressman Sherman talked about the pressure he and others were put under to sign the bailout:

The only way they can pass this bill is by creating and sustaining a panic atmosphere. That atmospherre is not justified. Many of us were told in private conversations that if we voted against this bill on Monday that the sky would fall, the market would drop two or three thousand points that day and another couple thousand the second day, and a few were even told that there could be martial law in America if we voted no. That’s what I call fear-mongering.

Obviously, the United States has run up a lot of debt – nearly $10 trillion worth. It should pay that debt. However, interestingly, Federal Reserve Chairman Ben Bernanke said in Febuary of just last year:

“I don’t think that the Chinese ownership of U.S. assets is so large as to put our country at risk economically,” Bernanke said, minimizing the possibility that China might suddenly dump some of its U.S. debt.

“It would be very much against their own interest to do so,” he said, ducking a question whether these holdings gave Beijing a potential political lever over the United States.¹

Why isn’t this being discussed in the media? If this is true – and who can doubt these statements – why hasn’t the government been clear about recent events? For some, I’m sure, a plan to rescue millions of disadvantaged homeowners seems like such a good idea. But as Arnold King pointed out in Economists with Pseudo-Knowledge:

. . . where are the stories of struggling homeowners? The struggling homeowner is the staple of political speeches (”we have to help struggling homeowners”) but the media are not exactly filled with stories of people who lost a lot of money on their homes. Maybe because they didn’t put any money down to begin with, so they have not lost anything.

What do you think?

Sources:

1. “Bernanke says China’s Might No Threat“. Reuters – ChinaDaily.com.cn. 24 October 2008.↩