Barron, I agree with the vast majority of what you say and post, and value your input here. I'm not sure where the idea comes from that Treasury purchased MBS from Russia and China, but here is what Paulson actually said (I will look for the video link).
Paulson DID say that a Chinese official told him that Russia approached the Chinese government to team up to sell MBS; however, Paulson also said he convinced China to hold ALL of the thier agency MBS they had at the time because he was going to Congress and our political system would eventually back ALL of the agency MBS by NATIONALIZING FnF - yes he actually used the word nationalizing in the interview.
Paulson led Treasury down the nationalized back up plan, but more importantly he and Benanke worked together to get the Fed to purchase what eventually became $2.5 T in agency MBS. The Treasury $225 B would NOT have touched the $1.7 T foreign holdings of Agency MBS at the time. Paulson stated explicity that the Chinese were convinced to hold ALL of their agency MBS through the crisis, he convinced them to do their own version of Quantitative easing, which they did in large fashion to help stem the crisis from spreading futher globally. Furthermore, he convinced the Chinese central bank to stop their private instituions from selling money market securities that were about to take down money market funds and its spread to commerical paper which would have brought down most private companies ability to meet day-to-day, week-to-week obligations to supliers and workers.
As to whether any of this is truly what happened we may never know because it is Hank's word and the Treasury Black Box against the rest of us. Oh, btw I agree with anyone who believes A LOT of this was done to mollify foreign interests and shareholders should NOT bear the brunt of these actions.
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