Financial Shocker: US looking for foreign investment

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Financial Shocker: US looking for foreign investment


Written by Kazi Mahmood
Wednesday, 30 July 2008
The US is in need of roughly 10 billion a day to keep its economy afloat. With its economy behaving like an old car engine that fails after every repair, the country is now seeking what it has scoffed at before: Foreign Direct Investment or FDI. (Updating.... please refresh to read additional paragraphs)
The overly proud Bush administration is welcoming investment from abroad and urging U.S. corporations to seize opportunities to rebuild their capital quickly by opening their doors for foreign investors. This is sign of a major crisis that has hit the US but has remained undeclared due to political embarrassment it would cause to the George Bush administration.
Earlier this year, Bush went to the Middle East with a beggars bowl, begging from the rich Arabs for cash. At that particular time, the Bush administration decided that America needed at least USD300 million to keep the economy afloat for at least 6 months.
It obtained half the money from the Arab leaders of the UAE, Saudi Arabia and Kuwait for example but was hoping that the Arab nations would increase their oil output significantly in order to help the US economy in a time of capital scarcity. Since this did not happen, the US is now turning to the most incredible ‘third world’ fashion of inviting foreign investors to put their money in the Americans mouth.The latest example involves Temasek Holdings [TEM.UL], an investment arm of Singapore's government, which will boost its position as the largest shareholder in Merrill Lynch , the biggest U.S. brokerage.Hard hit by the collapse of housing-related debt, Merrill said on Monday it was selling new stock to the public and to Temasek, which had an 8.85 percent stake as of June 30.Temasek's fresh $3.4 billion investment seemed likely to push its stake above 10 percent -- traditionally a trigger for enhanced U.S. scrutiny of such investments from a national-security perspective.
The US has established a very sensitive network run by the FBI which analyses every single penny that is sent to the US via banking transactions, in which even Letter of Credits are hugely scrutinized before it is accepted by a US bank. It is to wonder how this system will now allow foreign investment without any scrutiny is done?
A White House spokesman, Tony Fratto, shrugged off questions about the bigger stake in a U.S. financial institution, the latest in a string of similar investments by state-owned sovereign wealth funds from China, the United Arab Emirates and Singapore.
Sovereign wealth funds, based mainly in Asia and the Middle East, have helped bail out other U.S. powerhouses dogged by subprime-related debt writedowns, including Citigroup Inc and Morgan Stanley .
"We never comment on private transactions," Fratto said. "As a matter of policy the United States is open to foreign investment and we welcome it when overseas investors choose to invest in U.S. firms."
"It would be a concern if overseas investors chose not to invest in U.S. firms," he added in reply to a question from Reuters.
The comments by the WH spokesman is totally crap since the US in 2006 was adamant to comment and even prevent the sale of a cargo handling company to the Dubai Ports company, citing possible conflict with Muslims and terrorist activities in US ports.
A year ago, President George W. Bush signed into law a bill sparked by the Dubai Ports experience, that would boost oversight of acquisitions of U.S. companies by foreign firms.
The new law requires regulators to spend more time reviewing proposed deals, holds regulators more accountable for decisions and keeps Congress better informed about CFIUS.
Last month, U.S. Treasury officials said officials should use a light touch when vetting investment by sovereign wealth funds, even though critics have faulted them for a supposed lack of transparency and giving away leverage over U.S. institutions.
The reversal of the tough and tight policies by the US is clear sign of the big defeat that the Bush administration has registered on all grounds...from militarily being defeated by Muslim mujahideen in Iraq to economic sanctions and embargoes that has failed against foreign investment in the US.
While the U.S. Treasury will continue to review investments on a case by case basis, Assistant Treasury Secretary Clay Lowery told Wall Street last month that "we in the United States should not be looking for transactions to block."
U.S. Treasury Secretary Henry Paulson has prodded financial institutions to raise capital to counter losses from subprime debt and made clear the Bush administration is not opposed to sovereign wealth funds putting money into Wall Street.
"There is a choice to be made here," Paulson said in a speech to the New York Society of Financial Analysts in January. "Institutions that strengthen balance sheets can continue to play their vital role in financing businesses and individuals -- thus minimizing the impact of market turmoil on the real economy." Additional text from AFP