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Cablegate: Global Economy - Mortgage Crisis

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OO RUEHWEB

DE RUEHSO #0477 2531023
ZNR UUUUU ZZH
O 091023Z SEP 08
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8509
INFO RHEHNSC/NATIONAL SECURITY COUNCIL WASHDC IMMEDIATE
RUEHBR/AMEMBASSY BRASILIA PRIORITY 9644
RUEHRI/AMCONSUL RIO DE JANEIRO PRIORITY 8841
RUCPDOC/USDOC WASHDC 3167

UNCLAS SAO PAULO 000477

SIPDIS

STATE INR/R/MR; IIP/R/MR; WHA/PD

DEPT PASS USTR

USDOC 4322/MAC/OLAC/JAFEE
E.O. 12958: N/A
TAGS: KMDR OPRC OIIP ETRD BR
SUBJECT: GLOBAL ECONOMY - MORTGAGE CRISIS

Bush Nationalizes

Editorial in liberal Folha de S. Paulo (09/09) says: "Words matter
and the U.S. government avoids admitting that when nationalizing the
country's major mortgage companies. But it was exactly that when
George Bush's administration upon ordering the acquisition of Fannie
Mae and Freddie Mac.... It is probable that the brutal intervention
of the U.S. government in the economy dissolves the risk of
depression in a short term. However, it will not be able to avoid
the profound discredit that falls on the rules of the game that
promises not to socialize the damages of uncontrolled speculation."

Multibillionaire Help

Editorial in center-right O Estado de S. Paulo (09/09) comments:
"Once again the U.S. government worked overtime on a Sunday to avoid
aggravating a financial crisis... The projections may vary, but the
majority of the specialists seem to agree on one point: there is no
way to discard, at this moment, the hypothesis of new important
losses in the financial sector. However, the insecurity should
remain for some months. While uncertainty prevails, the banks will
tend to be cautious in assigning credit... In moments like these, it
doesn't work to talk about moral hazard because the willingness to
avoid a major disaster prevails.... Sermons with respect to moral
hazard are as old as inefficient. Ruling the globalized financial
system may be very difficult and of dubious efficacy, but it makes
more sense, in practical terms, than to trust in the market's
capacity for self correction.

A Heterodox Operation to Save Giants

Editorial in economic newspaper Valor Econtmico (09/09) says:
"Economists affiliated to the left rushed to point out yesterday the
'death of neo liberalism' with the U.S. government's decision to
bailout mortgage giants Fannie Mae and Freddie Mac... What
demoralized along with the virtual nationalization of half of the
mortgage market decreed on a Sunday before the opening of Asian
stock exchanges, was the so called fundamentalism of the market,
which rejects as heresy government regulatory intervention....Both
candidates to the U.S. presidency Barack Obama and John McCain,
supported the decision to transfer taxpayer money to save the
mortgage market. Both the Republican and the Democratic Parties
have, after all, fingerprints on the crisis... The growing
involvement of the U.S. taxpayers in the cost of the credit crisis
only reveals that the surprises are not yet done, and has no set
time period to finish."
White

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