Filed under: Deals, China, Middle East, Citigroup Inc. (C), Merrill Lynch (MER), Politics
News that the European Commission is planning to adopt proposals next week that will ask sovereign wealth funds to accept a code of conduct to govern their investment activities, raises the question if the U.S. government should take a look at the impact these funds might have on U.S. security.
Peter Mandelson, the European trade commissioner, stated the code will outline standards of governance and transparency for such funds.
“The emphasis in their investments should be on commercial motivations, not national or strategic considerations. I think such a code is possible to draw up and would get acceptance from the wealth funds,” the report quoted Mandelson as saying.
German companies, for example, are worried that China will steal their intellectual property or that Russian President Vladimir Putin wants to use such investments “as a political instrument,” according to European Member of Parliament Wolf Klinz.
With the huge inflows that the U.S. banking system are getting from some funds of allied countries (some more than others), where is the cry from the public to at least investigate the impact on national security? Citigroup (NYSE: C) raised $7.5 billion from Abu Dhabi and Merrill Lynch (NYSE: MER) raised more than $5 billion from Korea and Kuwait. After all, one of the important tools used in the war on terror is actually tracking money flows in and out of banks. This is much more easily done if the banks are owned by U.S. citizens. But if the banks transfer over control to foreign governments, that could potentially have a major impact.
It wasn’t too long ago that the proposal that the United Arab Emirates’ government-owned ports company would have control over the operations of major ports in the United Says was met with such fierce opposition that the proposal was beaten back. Where is the same national debate over these sovereign wealth funds buying big stakes in the U.S. banking system?
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer has no position in any stock mentioned as of 2/23/08.
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