International Economics

They Want to Buy Our Crappy Assets. Run For Your Lives!!!


Sovereign wealth funds, this year's Dubai Ports World-style ooga-booga man of international finance, are the subject of an interesting Washington Post feature today.

The star of the piece is Bader al-Saad, a former Chase Manhattan and First National Bank of Chicago man who came to the Kuwait Investment Authority in 2003 and started remodeling the state-owned, oil-fed investment fund on the endowments of Harvard and Yale, which meant getting out of the Persian Gulf and looking for diversified opportunities abroad. And it turns out, with the U.S. dollar and American asset prices deflating, those opportunities began presenting themselves in these United States. Excerpt:

It was not Bader al-Saad's idea to buy huge chunks of Citigroup and Merrill Lynch.

It was early January and Saad … was in his office as usual, reviewing potential deals in Kuwait and elsewhere in the Persian Gulf region, when the banks asked him to invest, he recalled.

"They called us…. We receive calls on most transactions," said Saad, whose fund bought stakes of $3 billion in Citigroup and $2 billion in Merrill Lynch. […]

He said the next big purchases of assets in the United States may be in the real estate sector, which he expects will peak as an investment target—in other words, hit rock bottom—in the next few months. Saad said he also thinks U.S. telecommunications companies and more financial firms would make good investments.

"There are certain opportunities which do not come every day," he said. "We consider the recent crisis as creating some opportunities in certain sectors. I look at history, such as the savings-and-loan problem. It created golden opportunities."

But fear not—legislators are busy looking for ways to discourage global liquidity from washing in to cash-starved Washington. The EU and U.S.-backed International Monetary Fund are drawing up targeted regulations and extracting you-will-only-come-seeking-profit pledges from the scary foreigners. Future president Barack Obama vows to stop "transferring wealth to these countries." The Council of Foreign Relations has issued a jeremiad against the "New Financial Superpower" [PDF] who will bring us to our knees by, uh, selling the U.S. assets they have already bought? It's all very confusing.

Some thoughts from Marginal Revolutionary Tyler Cowen here. Science Correspondent Ron Bailey explained how foreign ownership is not a threat, but stupid legislation is back in March 2006. And Kenton E. Kelly explained how a bogus security panic is alienating an ally and endangering our country in February 2006.