Thursday, January 17, 2008
WASHINGTON, Jan 16 (Reuters) - Ohio Democratic Rep. Marcy Kaptur, a long-time free trade skeptic, warned on Wednesday that the United States may come to regret allowing major Wall Street banks to sell sizable ownership stakes to foreigners.
"These big bankers and fund managers will stop at nothing for a profit, even at the price of our national security. They are selling out America," said Kaptur, a 13-term lawmaker who is now the senior female Democrat in the House of Representatives.
Many U.S. banks are recording big losses on subprime mortgage market investments. To patch up their books, some are turning to overseas sources for capital injections.
Just this week, Citigroup Inc (C.N: Quote, Profile, Research) and Merrill Lynch & Co Inc (MER.N: Quote, Profile, Research) announced raising $20 billion in capital from investors and sovereign wealth funds, some affiliated with foreign governments in Asia, the Middle East and elsewhere.
Last month, Morgan Stanley (MS.N: Quote, Profile, Research) said it sold a $5-billion stake to China Investment Corp. Citigroup earlier sold a large stake to the Abu Dhabi Investment Authority.
"We're raising money from foreign governments to pump into U.S. banking institutions?" Kaptur said on the House floor.
"Foreign capital indebts us more than the face value of the transaction," she said. "This kind of borrowing means America is no longer free. We owe, and our children will owe ... And they won't owe Uncle Sam. They'll owe the premier of Communist China, the king of Saudi Arabia, the emir of the United Arab Emirates, the bank of Singapore."
Kaptur said: "These creditors won't forget what we owe. They like the influence they are wielding. They will call in their favors to Wall Street, as they are calling in their favors as our troops are staged all over this globe.
"To those candidates who were elected with Wall Street's help and their enormous financial support, they will call." (Reporting by Kevin Drawbaugh; Editing by Tim Dobbyn)
From the US Treasury Dept.
Introduction. The United States has traditionally welcomed Foreign Direct Investment (FDI) and provided foreign investors fair, equitable and nondiscriminatory treatment with few limited exceptions designed to protect national security. The Exon-Florio provision is implemented within the context of this open investment policy. The intent of Exon-Florio is not to discourage FDI generally, but to provide a mechanism to review and, if the President finds necessary, to restrict FDI that threatens the national security.
The Exon-Florio provision is implemented by the Committee on Foreign Investment in the United States ("CFIUS"), an inter-agency committee chaired by the Secretary of Treasury. CFIUS seeks to serve U.S. investment policy through thorough reviews that protect national security while maintaining the credibility of our open investment policy and preserving the confidence of foreign investors here and of U.S. investors abroad that they will not be subject to retaliatory discrimination.
The Statute. Section 5021 of the Omnibus Trade and Competitiveness Act of 1988 amended Section 721 of the Defense Production Act of 1950 to provide authority to the President to suspend or prohibit any foreign acquisition, merger or takeover of a U.S. corporation that is determined to threaten the national security of the United States. The President can exercise this authority under section 721 (also known as the "Exon-Florio provision") to block a foreign acquisition of a U.S. corporation only if he finds:
(1) there is credible evidence that the foreign entity exercising control might take action that threatens national security, and
(2) the provisions of law, other than the International Emergency Economic Powers Act do not provide adequate and appropriate authority to protect the national security.
To assist in making this determination, Exon-Florio provides for the President or his designee to receive written notice of an acquisition, merger or takeover of a U.S. corporation by a foreign entity. Once CFIUS has received a complete notification, it begins a thorough review of the notified transaction. In some cases, it is necessary to undertake an extended review or "investigation." An investigation, if necessary, must begin no later than 30 days after receipt of a notice. Any investigation is required to end within 45 days.
Information provided by companies contemplating a transaction subject to Exon-Florio is held confidential and is not made public, except in the case of an administrative or judicial action or proceeding. Nothing in section 721 shall be construed to prevent disclosure to either House of Congress or to any duly authorized committee or subcommittee of the Congress.
Profits at what cost? will it cost us our homes, our businesses, our lives.
Seems to me it is not wise to allow foreign entities to buy up financial losses in the first place, recession or no recession the financial industry has been playing fast and loose with money in order to produce profits like have never been seen before with the big losers being the American people. Now like a kid that gets in trouble and does not want to pay the price for his indiscretions, has someone bail him out so he can continue misbehaving without worry.
The influx of foreign investment is having the same effect temporarily keeping the profits from declining while the foreign entities gather up more and more. Do the financials think they will be able to continue on like this forever? Yup, short sightedness is what got us all into this pickle to begin with. They will wake up one day to find the foreigners are now taking the profits and leaving the little golfers in the cold to fend for themselves.
That would be OK and would be a valuable lesson for the greedy little buggers with the one exception, our monetary based credit system would be subject to foreign control. The statement was made that the Saudis could own Wall Street on four days oil earnings, do we really want that?