The U.S. is urging China's central bank to buy more mortgage-backed securities despite a recent increase in subprime defaults.
U.S. Department of Housing and Urban Development Secretary Alphonso Jackson met with China central bank Governor Zhou Xiaochuan and Minister of Construction Wang Guangtao in Beijing this week, in hopes of tapping China's $1.33 trillion of foreign-currency reserves, according to a Bloomberg report.
Specifically, the U.S. wants the Chinese central bank to buy more mortgage securities from Ginnie Mae, a mortgage association under the Department of Housing.
China held $107.5 billion in U.S. mortgage-backed securities as of June 2006, up from $3 billion three years earlier, according to HUD's website.
HUD also plans to approach Chinese commercial banks such as China Construction Bank Corp. and ask them to buy mortgage securities, Mr. Jackson said, according to the report.
The housing department wants to sign a memorandum of understanding with Mr. Wang when he visits the U.S. in August, Mr. Jackson said.
Surging defaults on subprime mortgages recently caused the near-collapse last month of two hedge funds run by Bear Stearns Cos. (InvestmentNews, June 14) .