It's long been said that the America relies on the kindness of foreigners to fund it's ever-growing current account deficit. By the same token, our dependence on overseas investors and lenders also makes us vulnerable to external pressures that could be at odds with domestic needs and goals.

If you read between the lines of the following report by Bloomberg's Dawn Kopecki, "Fannie's Mudd Soothed Asian Investors as Bonds Rose," you get the distinct impression that the impetus behind the scramble to bail out the nation's largest mortgage lenders might have been a bit of economic blackmail by those our nation is financially beholden to (italics mine).

Fannie Mae Chief Executive Officer Daniel Mudd was sitting down to a glass of wine with his wife at their Washington home around 10 p.m. on Saturday July 12 when Treasury Secretary Henry Paulson called.

Concerns about the financial health of the biggest U.S. mortgage finance company had driven Fannie Mae's borrowing costs to the highest since March the previous week and its shares had tumbled 45 percent on the New York Stock Exchange. Investors in Asia, the biggest foreign owners of Fannie Mae's $3 trillion of bonds, were asking the Treasury to bolster the government- sponsored company and its smaller competitor, Freddie Mac, said three people with knowledge of the talks.

Paulson told Mudd he had a plan to restore confidence in Fannie and Freddie, the core of the Bush administration's efforts to revive the U.S. housing market. "At that point, the proposal began to take form," Mudd, 49, said in an interview. "We're trying to solve a crisis of confidence. Would this do it?"

The next afternoon, before financial markets opened Monday in Asia, Paulson announced the rescue plan, saying he would seek authority to buy unlimited equity stakes in the companies and their bonds if needed, while the Federal Reserve would lend directly to Fannie and Freddie. Congress included the proposals in a broader housing bill that President George W. Bush signed into law last week.

Asian investors were among the most important groups to soothe because central banks, financial institutions and funds in the region own $800 billion of Fannie Mae and Freddie Mac's $5.2 trillion in debt, according to data compiled by the Treasury. U.S. officials were concerned that sales from the region would push lending rates higher, said the people, who declined to be named because the discussions were confidential.

Stocks Plunge

The extra yield investors demanded to own five-year notes of Washington-based Fannie rather than Treasuries rose to 101 basis points, or 1.01 percentage point, on July 9, from an average of 39 basis points over the previous five years.