VZCZCXYZ0000
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