Satori Group: Fannie & Freddie May Cost China Billions.

( “Satori Group”: White House plan to reduce government backing for US housing could cost China dearly.

“Satori Group” has expressed concerns over the implications for China of the Obama administration‘s proposed winding down of state-backed mortgage finance companies, Fannie Mae and Freddie Mac.

China owns hundreds of billions of dollars of long-dates agency debt issued by the two giants who, between them, own or guarantee a significant percentage of the US housing market. The White House says it intends to wean the market off its dependence on government support and, although it reaffirms its commitment to honoring the guarantees given to bondholders, “Satori Group” believes that President Obama‘s administration may have difficulty doing so with the Republican party dominating Congress.

The firm says that Republicans may impose conditions and sweeteners on Mr. Obama in return for ratifying the proposal.

“As it is, there‘s quiet concern in Beijing over the debasement of the US dollar in the aftermath of huge fiscal borrowing and monetary policy in the wake of the financial crisis. Washington is going to have to make sure that both companies have sufficient capital to meet future obligations,” said a “Satori Group” press spokesman.

China holds the largest foreign currencies reserves in the world at $2.85 trillion-worth and much of this sum is held in treasuries, agency debt and equity in the United States.

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