P 240936Z MAR 09
FM AMCONSUL HONG KONG
TO SECSTATE WASHDC PRIORITY 7223
INFO WHITE HOUSE WASHDC
USDOC WASHDC
AMEMBASSY BEIJING 
AMCONSUL SHANGHAI
AMCONSUL GUANGZHOU 
AIT TAIPEI 0240
CDR USPACOM HONOLULU HI

UNCLAS HONG KONG 000547 
 
 
DEPT FOR INR/R/MR, INR/IC/CD, I/FW 
DEPT FOR EAP/PD, EAP/CM, EAP/P 
DEPT FOR VOA/BRF, TV-WPA 
WHITE HOUSE FOR NSC 
PRC POSTS FOR PA 
AIT 
USPACOM FOR FOR CIS PD ADVISER 
 
E.O. 12958: N/A 
TAGS: OPRC KMDR
SUBJECT: MEDIA REACTION: NEW USG PLAN TO DEAL WITH TOXIC ASSETS; 
U.S.-CHINA RELATIONS; IRAN 
 
TOPICS: 
¶1. New USG plan to deal with toxic assets 
¶2. U.S.-China relations 
¶3. Iran 
 
HEADLINES AND EXCERPTS: 
 
¶1. New USG plan to deal with toxic assets 
 
"Save the financial crisis but cannot avoid galloping inflation" 
 
The mass-circulation Chinese-language Apple Daily News remarked in 
an editorial (3/24):  "...Obama's economic stimulus package is close 
to $800 billion.  Treasury Secretary Geithner's plan to buy toxic 
assets from banks will cost over $700 billion.  Add in Federal 
Reserve chairman Bernanke's zero-interest-rate policy, quantitative 
easing strategies and his plan to run the money printing machine to 
buy government and corporate bonds and the U.S. administration has 
to inject some US$2-3 trillion into the market in just a few months. 
 The speed and the scale of these bailout plans are not only 
unprecedented, but their impact on global economies and financial 
markets will definitely be greater than the impact when the U.S. 
dollar detached itself from the gold standard system and the 
free-floating of the exchange rates of the U.S. dollar....  It is 
not yet known if the Obama administration's strong measures can beat 
the financial tsunami.  Although the U.S. administration can prevent 
the collapse of the financial system and prevent the continued 
decline of the economy by turning on the 'water tap', the outlook 
for the U.S. economy, as well as the global economy, is not 
optimistic.  What follows the recession may not necessarily be a 
strong recovery but galloping inflation or stagflation." 
 
"Stock market accepts the toxic-asset removal plan; the U.S. does 
not want regulations" 
 
The independent Chinese-language Hong Kong Economic Journal said in 
an editorial (3/24):  "...Judging from the U.S. stock market 
yesterday, the financial market seemed to accept the U.S. Treasury 
Department's plan.  If the plan succeeds, the U.S. credit market 
will be revitalized and the aftereffect of the financial crisis will 
be gradually improved.  However, dealing with the toxic assets of 
banks is the first step of the 'medical treatment'.  How to rebuild 
the regulatory framework of the future financial market is the 
biggest problem after the financial tsunami.  In the G-20 summit 
next month, European countries (mainly Germany and France) suggest 
focusing on rebuilding the international financial system and 
strengthening financial regulations....  The U.S., which enjoyed 
prosperity due to financial liberalization and innovation of the 
financial system in the past, does not agree with the regulatory 
viewpoint of Europe....  The AIG bonus scandal makes Americans treat 
the financial industry as the devil of greediness.  The U.S. 
administration may finally have to compromise with Europe's 
regulations." 
 
"Let market return to market; obviously 'rewarding' Wall Street" 
 
The center-left Chinese-language Sing Tao Daily News said in an 
editorial (3/24):  "...Making use of the expertise of the vulture 
funds can avoid the disadvantage of letting the government set the 
prices.  The plan is to let these fund companies calculate the risks 
and profits and set the prices to auction for toxic assets from 
banks.  The market mechanism will find the real market prices of 
these toxic assets.  The banks' balance sheets will therefore be 
cleaned up.  Apart from providing 'funding', U.S. officials 
guarantee that the U.S. administration will not impose as many 
requirements as it has on the financial institutions, which sought 
money injection from the administration, in order to attract these 
fund companies to participate in the plan.  Wall Street's 
preliminary reaction toward such a 'lucrative plan' is quite good. 
The next step will see whether the Congress will pass the 'rewarding 
Wall Street' plan in such a political climate.  The U.S. 
administration has already released information that Treasury 
Secretary Geithner will propose a new regulatory plan on the 
financial system this week.  This is to show Congress that the 
government is not tilting one-sidedly toward Wall Street, hoping to 
reduce objections against the rescue plan.  The U.S. administration 
introduces bailout plans and regulatory plans at this moment because 
it has to show some achievements to the G-20 summit next month and 
to build the momentum for Obama to attend his first international 
 
 
summit." 
 
"Direction of 'removing toxic assets' is right, regulation should be 
implemented together" 
 
The pro-PRC Chinese-language Wen Wei Po had this editorial (3/24): 
"U.S. Treasury Secretary Geithner yesterday announced the details of 
purchasing 'toxic assets' from banks.  The U.S. administration will 
use $75 to $100 billion to buy toxic assets, 8 percent of which will 
come from private investors.  The plan is expected to auction assets 
to the highest bidder and finally US$1 trillion toxic assets will be 
snapped up in phases.   Toxic assets are the root of the financial 
tsunami.  This time, Washington is determined to thoroughly solve 
the problem.  It will remove toxic assets from the financial 
institutions through the joint cooperation of private and public 
sectors.  This will help to restore the credit function of the 
financial institutions and to mend the crack in the credit chain. 
However, toxic assets affect the whole world because the financial 
institutions lack regulations.  Washington spends huge sums to 
'remove toxic assets', it should also improve its regulatory system 
to avoid new crisis." 
 
"Global stock markets rebound; financial noose is not yet untied" 
 
The independent Chinese-language Hong Kong Economic Times commented 
in an editorial (3/24):  "...Due to the financial crisis, the U.S. 
economy is in serious recession.  The Obama administration must find 
the root of the problem before it can stop the financial crisis from 
worsening.  The current problem is not whether the problem has been 
solved or not, but whether the solution to the problem has been 
found yet.  Everyone hopes to see the U.S. stocks rise from the 
bottom because it will imply that the global economy will 'walk out 
of the valley'.  However, the objective environment will not be 
changed by subjective desire.  Though global stock markets leap, 
investors still have to be conscious that they may come across 
another severe winter after the rebound." 
 
¶2. U.S.-China relations 
 
"Hope that Sino-U.S. leaders' meeting will lead to cooperation in 
combating the financial crisis" 
 
The working-class Chinese-language Sing Pao Daily News wrote in an 
editorial (3/24):  "...Since U.S. President Obama took office, 
Sino-U.S. relations are at a critical moment of linking past and 
future.  They will be facing huge opportunities and challenges.  The 
first meeting between the two leaders will be of significant 
importance because China and the U.S. still have differences.  They 
don't share the same view on all issues.  And both China and the 
U.S. know that they have to reduce their differences and conflicts, 
so that Sino-U.S. constructive cooperation relations can be further 
developed.  Improving Sino-U.S relations will benefit people of the 
two countries and will be good for world peace and stability.  One 
should see that China makes all efforts to support the U.S. in 
riding out the financial crisis.  The U.S. should also make all 
efforts to safeguard the common interests of the two countries, such 
as easing the restriction on exports to China which includes the 
restriction on exports of advanced technology.  It will come to a 
win-win situation....  It is hoped that countries can come to an 
agreement at the London financial summit to bring about the 
international financial reform and overcome the financial crisis 
together." 
 
¶3. Iran 
 
"Actions need to improve the relations between the U.S. and Iran" 
 
The pro-PRC Chinese-language Macau Daily News remarked in an 
editorial (3/24):  "U.S. President Obama delivered a historic speech 
in Washington on March 20 [Iran's New Year] directly addressing the 
Iranians via television....  The TV speech is viewed as one of the 
most decisive foreign policy statement made by Obama since he took 
office two months ago....  In response to Obama's speech, Iran's 
supreme leader Khamenei stressed that the U.S. has not changed its 
Iran policy.  However, he said that if the U.S. is willing to 
change, Iran will also change accordingly.  Even though the Iranian 
public has a good opinion of Obama, Iranian officials fear that 
Obama's soft posture is just a repackaging of the United State's 
Iran policy and not molding new policy.  They believe that Obama 
makes the international community support Washington's lasting 
policy of isolating Iran.  Not long ago, the Obama administration 
extended the sanctions of the Clinton era on Iran.  Such a move made 
Iran believe that the current U.S. administration's Iran policy is 
the same as the Bush administration's which was hostile.  The only 
difference is the current policy is more refined." 
 
DONOVAN