Message to sovereign wealth funds: don’t invest with us yet, give it a few months, then we’ll be really desperate. “Transparency” shouldn’t be an issue then.
After weeks of to-ing and fro-ing among the commentariat, sovereign wealth prejudice is beginning to crystallise - or so it might seem.
On Friday last week, the EU unveiled proposals for a “voluntary code of conduct” to govern SWFs. And on Tuesday this week, the WSJ reported meetings between the US Treasury and two of the world’s largest SWFs as part of a process to “draft rules”.
But assuming we removed SWFs from the current financial crisis. Where would the West’s banks be? Facing emergency rights issue s certainly, and in some cases, collapse.
Complaining about big, government-backed foreign investors also forgets much of America’s own economic romp around the globe over the past century. As Alan Greenspan said in a speech in the UAE on Monday:
We have always been the major force pushing (for globalisation), and I think for us to be pulling back makes me sad … because it is not to the best interest of the United States.
I suspect that most of the negative response (to SWFs’ investments) is (driven by) protectionism. In fact, I don’t suspect it, I know it.
Maybe all this baiting is beginning to bite. Gillian Tett reported earlier this month that many foreign investors were cooling to the idea of investing in ailing financial institutions. Qatar’s prime minister Sheikh Hamad is certainly erring that way. In an interview last week he told Reuters:
In the United States, we need to wait a little… We think there are still problems with the banks.
For Yves Smith at Naked Capitalism, this whole latest run of “negotiations” and rule drafting is just a sham.
We are pretending that we have negotiating leverage in this matter. We don’t. We need the dough desperately. Unless we get our saving rate up to make ourselves more independent (which will almost certainly lead to a recession or a very prolonged period of low growth), we are in no position to place restrictions on capital inflows (except now and again, for show)
So these negotiations are really theater for the benefit of the American public. We’ll plead in private, if need be, for the SWF to give us something to keep Congress from interfering, and they may well agree to cosmetic measures. Or, if they really have no interest in going along, they’ll just string out the discussions until our financial sector has another ratchet down and the wounded players have nowhere else to turn.
