While attending the 2008 Beijing Olympics, Former Secretary of the Treasury Henry Paulson learned that Russia was encouraging China to dump its Fannie Mae and Freddie Mac bonds in an effort to force another U.S. bailout. In his memoir, "On the Brink", Paulson writes, "The report was deeply troubling -- heavy selling could create a sudden loss of confidence in the GSEs and shake the capital markets... I waited till I was back home and in a secure environment to inform the president." (Bloomberg.com)

Although Russia sold the entirety of its Fannie Mae and Freddie Mac bonds, worth $65.5 billion in 2008, the country denies approaching its southern neighbor. Such a move, however, would have severely undermined confidence in U.S. government sponsored enterprises (GSEs). Since 2008 China has become the world's largest holder of foreign exchange reserves and the largest foreign holder of U.S. securities. As of November 2009, mainland China and Hong Kong held a combined total of 935.8 billion dollars worth of treasury securities, amounting to over 26% of the total U.S. debt held by foreign investors. (U.S. Treasury Department)

The potential Russia-China partnership serves as a sober reminder of the realities of economic strategic power and influence. Had Russia succeeded in securing Chinese cooperation, the U.S. would have faced an even greater economic challenge. This illustrates the economic component to the gathering storm which places U.S. interests at greater risk when our policies increasingly force us to rely as a nation on the good will of governments with opposing agendas and interests.

As President Obama presented his proposed budget this week, Maya MacGuineas, President of the Committee for a Responsible Federal Budget, cautioned against undervaluing foreign assessment of U.S. financial security. "And yes, we know it is an election year, but we cannot continue to delay - foreign credit markets are really not interested in our partisan in-fighting - they are interested in whether the U.S. will remain a safe place to invest." President Obama's budget does not send the message that we are serious about fiscal responsibility and protecting America's future to international investors or to Americans struggling with their own budgets.