the truth!: radlibs who hate america plot with chinese commies to control
u.s. economy
http://www.msnbc.msn.com/id/22362982/
China controlling more of U.S. economy
Country leads surge of foreign investments in Wall Street banks
The Associated Press
updated 4:21 p.m. CT, Fri., Dec. 21, 2007
NEW YORK - There's a good reason schools across the country are scrambling
to find people who can teach Chinese: It's
quickly becoming business' second language as Wall Street seeks to tap
China's $1.3 trillion in foreign reserves.
China has been making increasingly aggressive investments in some of the
world's most prestigious financial companies in
recent months - most of them American. Morgan Stanley, Bear Stearns,
Blackstone Group, and Britain's Barclays have all
negotiated major stakes by Chinese government-controlled investment funds.
Investment banks ailing from the subprime mortgage mess are looking for
money to shore up their balance sheets. And
China is leading a surge of strategic investments from Asia and the Middle
East that so far have sunk about $25 billion
into Wall Street banks.
That's just the start of what some believe is a dramatic reversal of
financial power in the shadow of Wall Street's
credit turmoil.
"Both Chinese private and government interests are controlling more and
more of the U.S. economy, and this is a result
of the big trade and budget deficits we have," said Alan Donziger,
professor of economics at Villanova School of
Business. "These investments will make the U.S. somewhat less independent,
but this is inevitable when we live in a
global economy."
To be sure, Wall Street's current predicament is "our own doing," he said.
Turmoil in the credit markets have been
fueled by defaults on subprime mortgages, and that's caused the Federal
Reserve to attempt a bailout of the industry
through interest rate cuts.
Lower interest rates have caused the dollar to slide in value against
other major currencies. And, for foreign
governments, the devalued dollar makes investments in these financial
institutions cheap.
In the 1980s, Japanese investors snapped up real estate and invested in
businesses across a number of sectors. This new
wave of foreign investment is different because Asian and Middle Eastern
governments are taking stakes in financial
institutions - a cornerstone of the U.S. economy.
China agreed to pay $5 billion for a 9.9 percent stake in Morgan Stanley,
and those securities pay 9 percent a year
until they convert to shares in 2010. That translates to a gain of about
$450 million of cash next year.
But, for Morgan Stanley investors, the infusion of new stock two years
from now will dilute their shares - and
potentially make owning Morgan Stanley's securities less valuable. The
same can be said about other banks that receive
foreign investments.
The deals have been structured so that the sovereign funds are passive
investors with no seat on the board, and this
escapes regulatory scrutiny. This week President Bush said Thursday he was
"fine" with foreign investors snapping up big
stakes in U.S. banks and financial firms.
By keeping investments under 10 percent, it does not trip an automatic
review by the government. Bush, and others,
believe the injection of foreign capital helps keep the banks competitive
and restores faith in an industry beaten down
this year.
"These are non-controlling investments, provides capital, and really is a
statement of confidence," said John Douglas, a
partner with law firm Paul Hastings who heads its global bank regulatory
practice. "There's a lot of good things here."
But, some banking analysts believe these government-sponsored funds might
get more say than the banks are admitting.
"The Chinese are putting $5 billion into Morgan Stanley without there
being some kind of quid pro quo of what they're
going to get other than interest on their investment," said Dick Bove, an
analyst with Punk Ziegler & Co. "It's part of
a major ****ft in the worldwide financial system that I think will be very
negative to the U.S."
He said these kind of investments are not over, and expects to see others
surface next year. In some cases, investment
banks that have already received investments might strike other deals to
increase capital.
Next up? Speculation swept through Wall Street on Friday that Merrill
Lynch & Co. is on the hunt for a foreign
investment to help cu****on what could be a huge fourth-quarter writedown
in January.
"The whole situation has changed with financial power moving dramatically
toward China and the Middle East, and that
will have significant impact over time," Bove said.
© 2007 The Associated Press. All rights reserved. This material may not be
published, broadcast, rewritten or
redistributed.
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