American home buyers haven't been the only ones counting on the supposed reliability of Fannie Mae and Freddie Mac. The two companies' bonds have become favorites of Asian governments looking for somewhere to put the dollars generated by big trade surpluses with the US. Until recently, it made sense.

The market was booming, yields were slightly better than plain-vanilla Treasuries, and everyone assumed Washington backed the mortgage companies.

As the US housing crisis deepened and Fannie and Freddie started sinking, though, foreign bankers wanted assurances that their assumption was correct. "Treasury saw foreign governments getting the willies," says one Senate aide.

Especially those in Asia: Four of the top five international holders of Fannie and Freddie paper are Asian. Deepening problems at the two enterprises spurred anxious phone calls to Washington. Chinese banks "were probably facing significant losses," says Logan Wright, an analyst at Stone & McCarthy Research.

This summer, the foreigners started pulling back. In July, the Bank of China, a state-controlled commercial bank, trimmed its holdings of the agencies' debt by selling or choosing not to roll over $4.6 billion of their bonds. After increasing by an average of $22 billion a month in the first half of 2007, central bank holdings of Fannie and Freddie securities on the Federal Reserve's books fell by $27 billion from mid-July through early September, according to Brad Setser, a former Treasury Dept. official and now a fellow at the Council on Foreign Relations. "The threat of a central bank buyers' strike was real," he says.

Just what Asians wanted

The effective nationalisation, however temporary, of Fannie and Freddie was just what the Asians wanted. "From my point of view, this is positive," Zhou Xiaochuan, governor of China's central bank, said on Sept 8, according to the state-owned China Daily. "We never had any doubt" Washington would come to the rescue, says Ha Keun Cheol, an economist at Korea's central bank in Seoul.

Now that Treasury Secretary Henry M Paulson Jr. has made his move, will Asia's bankers be more comfortable with their reliance on Fannie and Freddie paper? The Sept 7 intervention likely makes their debt a safer option - and central banks may have little choice.

"Those trade surpluses are US­dollar-denominated," and as many European economies weaken, the euro isn't a very attractive alternative, says Goldman Sachs analyst Roy Ramos. For Asian bankers, "there's only so much you can do" to diversify away from the greenback, Ramos says.

That's not to say there's no downside for Asia. The US housing crisis is still real, and the economy is struggling. Already, Chinese exports are slowing as American consumers close their wallets. Continuing weakness in the US might further hurt Asia's exports - which could, of course, slow growth in their foreign reserves and make big investments in US debt less necessary.

For now, though, Asia's central banks are emerging as winners. "They have nothing to complain about - they're made whole," says Edwin M. Truman, an economist who headed the Fed's international finance division from 1977 to 1998. "The fact of the matter is, if Fannie and Freddie can't pay, you and I will."

With Chi-Chu Tschang in Beijing, Moon Ihlwan in Seoul, and Hiroko Tashiro in Tokyo.