Oil-rich Middle Eastern countries have been snapping up stakes in or acquiring various U.S. and European companies, including private equity firm Carlyle Group (CYL.UL: Quote, Profile, Research) and U.S. luxury retailer Barneys New York.Exchanges, which are in the midst of a wave of global mergers, seem have become their latest focus. . . .
They want influence in global financial markets by buying strategic stakes in exchanges, but may not want to take them over.
“It’s about getting a seat at the table to influence future events,” said David Easthope, an analyst for Celent, a financial consultancy.
If Britain remains sanguine, the London stock exchange will be controlled by Duabi (28% and Qatar (24%). If the American people do not mobilize, secretary Paulson will have his way and Dubai will get a major say in the running of Nasdaq. It will own 20% and will appoint 2 out of the 19 board members:
NYSE Euronext (NYX.N: Quote, Profile, Research) Chief Executive John Thain said Dubai’s Nasdaq stake and two board seats gives them “significant” influence and a question mark hangs over whether such a structure is acceptable to legislators.“I think there will be issues raised and concerns about any government owning or controlling a U.S. exchange,” Thain told Reuters.
If the NYT is right, with the exception of Chuck Schumer, neither Democrats nor Republicans are interested in stopping the Gulf dictators from gaining undue influence on the global financial system. Luckily, Schumer, the chair of the Joint Economic Committee of the House and Senate is no minor player and the issue is gaining traction. That is the implication of today’s FT editorial entitled Paulson’s resolve. It notes that
the planned participation in the US icon by an ambitious government-owned Gulf state entity has rekindled controversy over sovereign wealth investment. The emergence of state backed agencies from Asia and the Middle East as large-scale investors in companies in the US and elsewhere was the big financial story of the summer until knocked off the front pages by the subprime induced credit squeeze.It was a story that stirred emotions - and has still the power to do so. That Chuck Schumer, the New Yord senator, has raised questions about the Dubai stake in Nasdaq is disturbing. Mr Schumer has form.
It goes on to urge “Sovereign investors” to help Paulson “resist protectionism” by becoming more transparent. Transparency is an admirable goal. But it is not a sufficient one and the issue is not protectionism or racism or Islamophobia. It is the subversion of the global economic system by less than savory state actors (most of the SWF belong to dictatorships)..
In any case, the lines are being drawn and it is crucial that the army of David mobilize and explain to the American people that the dangers involved in Dubai gaining a significant foot hold in running our financial institutions are at least as great the danger avoided by preventing it from taking over our ports.
This issue should not be permitted to continue languishing on the financial pages. If it does, Congress will let the deal through.
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