1 ° The titration of GSEs.
The rescue of GSEs Fannie Mae and Freddie Mac have had negative effects on the volume of debt securities held by foreigners. This is $ 403 billion of debt that foreigners resold in (in or between?) 2007 and 2009. These sales affected the total net financial position of the US vis-à-vis the outside (FRB FFA L 107 Line 1 and 26), as well as the net, flows of financial capital entering the USA (FRB FFA F 107 Line 13 and 39). It seems that the FED policy for GSEs has reversed the trend since the T-2 2010. But it is still too early to determine whether GSE’s sound securitization policy Ginnie Mae will be enough to restore foreign purchases of GSEs. GSE securitization products an eminent role, a role that is all the more important in the coverage of the balance of payments deficit that no comparable company exists outside the USA.
2 ° Private securitization.
To examine private securitization, we used a brand new Treasury statistic. We only used the net balance of private and public ABS. This net balance measures the ABS purchases of foreigners in the US and the US outside the US and measures their respective roles in covering the balance of payments deficit by the net capital balance.
Net purchases of agencies’ securitization products by foreigners (A) experienced mixed trends. It appears, however, that Ginnie Mae’s securitization of GSE securitization has had a positive impact. The year 2010 is different from the Summer-Winter 2009 by a resumption of net purchases of ABS GSE.
Net purchases of private ABS securities (B) are more modest, reflecting the fact that US investors can also buy ABS outside the US. The net transactions of ABS reflect the general crisis of private securitization and the distrust of these products, they were negative for the US until spring 2010.
The stimulus policy for the securitization activity of the GSEs has therefore been penalized by the underperformance of private securitization. The net transaction of all securitization products (C = A + B) is therefore pulled down with the exception of the spring 2010 period.
ABS net transactions of US investors abroad (D) had a nil role in the evolution of all ABS (E) net transactions due to their very low balances from April to January 2010. It should be noted, however, that they have been modestly up since the winter of 2010, which slightly affects all net public and private ABS transactions.
The balance of net transactions (E = C + D) appears deteriorated from summer 2009 to winter 2010, it seems to recover since the winter of 2009-2010.
This recovery is not without importance for the coverage of the balance of payments deficit which is no longer ensured by all net financial flows since 2007. Since 2008, the weakening of US portfolio holdings by foreign investors is a factor penalizing the international value of the American currency. In portfolio investments, treasury bills have been substituted for GSE’s private securitization products and securitization products. The still fairly modest recovery of ABS transactions is one of the essential elements in restoring the ordinary conditions of US growth, assuming that the balance of payments deficit is covered by the positive balance of capital flows to the US.