Since the 1980s Americans had grown used to the idea that Asians—first the Japanese, now the Chinese—owned their government debt. That was the anxiety that haunted the Hamilton Project. What they did not reckon with was that foreigners owned a large portion of America’s houses. By 2008 roughly a quarter of all securitized mortgages were held by foreign investors. Fannie Mae and Freddie Mac funded $1.7 trillion of their portfolio of $5.4 trillion in mortgage-backed securities by selling securities to foreigners. China was by far the biggest foreign investor in these “Agency bonds,” with
...more
