Reuters Investigates

Intrigue in China’s U.S. Treasury buying

A Reuters exclusive today describes a method China used recently to hide some of its U.S. Treasury purchases – “US caught China buying more Treasuries than disclosed.”

Treasury officials said they were simply modernizing outdated procedures two years ago when they revamped the rules for participating in government bond auctions.

The real reason for the change, a Reuters investigation has found, was more serious: The Treasury concluded that China was buying much more in U.S. debt than was being disclosed, potentially in violation of auction rules, and it wanted to bring those purchases into the open – all without ruffling feathers in Beijing.

Stephen Culp, Reuters graphics editor, came up with a handy visual explanation for the practice that allowed China to mask billions of dollars worth of U.S. debt purchases at auctions. China placed its bids informally through primary dealers, who then placed their bids at Treasury auctions without naming China as a customer. The Treasury outlawed the practice in June, 2009, but kept the reason for the rule-change under wraps.

Read the story in PDF format here.

Diplomacy Inc

By Ben Berkovitz

Diplomacy is a complex thing, and it gets even more complicated when diplomats are trying to act as salesmen.

A series of State Department cables, obtained by WikiLeaks and provided to Reuters by a third party, demonstrates just how intertwined American political and commercial interests really are. (See special report “Weapons, frozen chicken, and the art of diplomacy“)

Sometimes it takes an illustration, like this one, to explain just how these sorts of deals work. One conversation leads to another, which leads to the mention of someone’s interest, which gets passed up a chain of command – and all of a sudden, perhaps unexpectedly, someone gets what they wanted. It may seem simple but it rarely is – some of the transactions mentioned in the cables played out over the course of years, and in some cases they still have not been finalized. (There are examples where the flowchart would take up two computer screens just to summarize.)

(For a multimedia PDF version of the special report, click here)

America’s “Dreamless Dead”

Washington economics correspondent Emily Kaiser delves into plutonomies and what pollster John Zogby calls the “Dreamless Dead” for her special report on income inequality in the United States.

Here are some interesting numbers from the OECD on how the wealth gap in America compares to other countries. (Full disclosure — I’m British)

Following the money in O’Donnell’s campaign

Mark Hosenball has been in Delaware and Pennsylvania reporting on the midterm election campaign for our special report “Conservative donors let Christine O’Donnell sink.”

If that’s not enough O’Donnell for you, here’s his report from a bastion of conservative thinking in Delaware:

By Mark Hosenball

Republican Delaware senate candidate Christine O’Donnell may be the darling of both national and local Tea Party groups. But she’s not particularly beloved at one of Delaware’s most august and esteemed conservative organizations.

Among the more venerable institutions of modern American conservatism is the Intercollegiate Studies Institute, an organization based in a mansion in suburban Wilmington. The Institute, dedicated to the promotion of conservative principles on American college campuses, has an impeccable pedigree: its first president was the godfather of American conservative thought, William F. Buckley Jr.

But if records filed in Federal court in Wilmington are any guide, it is one of the Delaware conservative organizations least likely to be campaigning aggressively in support of Christine O’Donnell’s Senate bid. This is because both the Institute and O’Donnell are still smarting over an ugly lawsuit O’Donnell filed against the group after she claimed that they had unlawfully fired her as their director of communications and public affairs in 2004.

Highlights from O’Donnell’s grievance against the Institute, originally written up by O’Donnell herself in a rambling 55 page Federal Court complaint, were reported in the conservative Weekly Standard magazine shortly before the Delaware GOP primary and then given added publicity on the Delaware Republican Party’s official website. 

Club Fed: the ties that bind at the Fed

 We’re getting a lot of good feedback on our special report on cozy ties between Wall Street and the Fed. As one Wall Street economist put it: “I’ve never seen the ‘Fed Alumni Association’ used more extensively for back-channel communications with the Street than has been the case since June.”

The story pulls back the veil on the privileged access that Federal Reserve officials give to big investors, former Fed officials, money market advisers and hedge funds.

Another economist from a European bank thanked us for the report, saying: “I hate the idea that monetary policy is communicated through non-official channels, be it old friends or newsprint.”

Personally, I’d argue that if it comes via the press, at least the information is available to everybody in the market at the same time, but then a journalist would say that.

For a printable version in PDF format, click here.