November 27, 2007

Major Sheikh-up at Citigroup

Meet Robert Rubin's new business partner: Sheikh Ahmed bin Zayed al-Nahyan, managing director of...well, Abu Dhabi. Any distinction between the political and business spheres in that richest of all the world's cities is, shall we say, chimerical (today's word, meaning "imaginary, unreal;" from the Greek "chimera," referring to a fire-breathing monster which apparently was part goat, part lion and part serpent. Sounds like something you might see with a bad ouzo hangover, if that resinates with you. No typo there, I simply demand that my readers pay attention; for example, did you miss the pun about "oxen being gored" in yesterday's installment about global warming? Stop sleeping through these things. Part of the mission statement here at the Pond includes waking Americans from their TV-induced stupor). Abu Dhabi decided to invest $7.5 billion in Citigroup on very favorable terms, guaranteeing itself an 11% return on securities convertible to stock at designated strike prices a few years down the road. Abu Dhabi immediately became Citigroup's largest investor. The second largest is an L.A. investment group, which sounds reassuring, but the third is a Saudi prince, Prince Alwaleed bin Talal. Thus, Citigroup got rid of one prince, Charles Prince, its CEO, but retained a much wealthier and more influential one. But I'm concerned that Alwaleed is going to get pissed off at his demotion and buy some more of America's biggest bank. If he decides to do that, money won't stop him. The United Arab Emirates (of which Abu Dhabi is the "capital") and the Kingdom of Saudi Arabia pull in a combined $1.3 billion per day from petroleum sales, and as that light, sweet crude in which they specialize nears one hundred bucks a barrel, I imagine the prince must have a setup like Scrooge McDuck; he has a tower full of gold coins and a steam shovel to move it all around.

By the way, Abu Dhabi recently bought a 7.5 % stake in the privately-held (very privately held) Carlyle Group, that mysterious and politically influential holding company which once employed George W. Bush and George H.W. Bush, along with James Baker and lots of other Washington insiders. It's all pretty cozy, isn't it? Senator Charles Schumer (Turncoat,-N.Y.) thinks the Citigroup deal is just dandy. The bank needs money, Abu Dhabi has more money than God, so where's the problem? The stock market sure likes the deal; it went skyward like a Patriot missile closing on a Saudi-financed Pakistani missile. Schumer did get exercised about that "Dubai ports deal;" remember that? The very idea! We were going to turn over our port security to a country which two of the 9/11 hijackers called home! Under this logic, of course, we shouldn't let Prince Alwaleed own anything like the huge stake which he holds in America's biggest bank, since fifteen of the hijackers came from our "ally," Saudi Arabia. And didn't we recently discover that about 40% of the foreign jihadis in Iraq originate in Saudi Arabia, along with lots of money to fund their killing of American soldiers and Iraqi citizens? Why this kid-glove treatment? Oh, now I remember. Still, shouldn't someone organize a "Fair Play for Dubai" committee? Is that idea so chimerical?

It's a neat loop. Citigroup is in deep doo-doo because of all the subprime loans and worthless mortgage-backed securities on its books. It's slowly and grudgingly letting the news out, little by little, about just high deep the poop is piled. All those cheap loans were made possible by all the money invested by China, Japan and "sovereign wealth funds," such as those in Abu Dhabi and Saudi Arabia, in U.S Treasuries. All those cheap loans crapped out and Citigroup began going under. Now the "sovereign wealth funds" are back, only instead of buying U.S promises to pay at measly Treasury rates (and then enduring the devaluation of their investment because of the tanking greenback), they're cutting out the middlemen, Henry Paulson and
Ben Bernanke, and just buying the goddam bank, like they shoulda in the first place.

Well, yeah. Saudi Arabia and the U.A.E. aren't exactly democracies. And in that thrilling second Inaugural, Bush did promise to transform the world with the "gift of freedom," just like in Iraq. But let's get real here; we have to take on one despotic regime at a time. And man, do we need the money in the meanwhile. So while democracy spreading is a nice idea, it's a little unrealistic to slay all these lion-goat-serpent thingies all at one go. Chimerical, to say the least.

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