SURPRISE! BUSINESS WITH THE ARABS IS HELPING THE US
WHAT a difference a few years make.
Back in early 2006 when a United Arab Emirates-based company was merging with Britain’s P&O, Americans were whipped into a xenophobic frenzy when it became known that the deal would transfer management of six US ports from British to Arab hands.
In recent months, a different transfer of key American assets has been taking place – deals cut from a position of US weakness that in theory will give foreigners a foothold into our economy far more valuable than access to our ports.
Battered by billions in subprime slime, Wall Street has put itself on the block and big chunks of our most venerable firms being sold off at fire sale prices to the oil sheikdoms of the world – not to mention some less-than-democratic Asian governments.
All told, some $60 billion has been invested by China and sovereign wealth funds into our banking system this fall.
It’s a number approximately commensurate with the amount of money Wall Street has admitted to squandering in its subprime escapades. But like the losses, the overseas investments are sure to grow.
Hardly a day has gone by this month without news of such investments, and when they happen, stock investors tend to stand up and cheers. Why? I suspect that question will be asked again and again another day.
Just this past week, once proud Morgan Stanley announced that it had sold 10 percent of itself to the Chinese government, as the former reds rushed in to sop up the red ink. On Friday it was Merrill Lynch, carving up the stake in the bull for a Singapore investment firm, a move that ignited a Santa Claus rally.
Indeed, with an estimated $2.5 trillion – twice the amount controlled by the entire hedge fund industry – at their disposal, China and other sovereign funds are ripe for a spending spree.
Sure, right now these sovereign investors appear passive, and their stakes rather small.
What’s troubling is that no US or western investor has stepped up to the plate – think Warren Buffett. Perhaps the smart money is biding its time.
But if the credit contagion continues, the real games may begin. In that case, foreigners with toehold positions in almost every major US financial institution will be in a position to up the ante.
If that happens it will make the Dubai Ports outrage look like a tea party.
TERRY KEENANis anchor of Cashin’ In, an investing program that appears on Fox News Channel on Saturday mornings at 11:30. E-mail terry.keenan@foxnews.com.