Sign of the Times – Citigroup and Merrell Lynch Are Seeking More Capital Injections from Overseas
It is a sign of the times that many of our largest financial institutions will have to be bailed out with foreign capital. The circle is now complete. The US sends money overseas to pay for imports (including a lot of oil). The countries sit on the money sent overseas and build up quite a war chest. They in turn take the money and buy parts of our largest companies in the US. The US companies and the press always state that the foreign capital is invested without strings. Don't believe that for a minute. Nobody makes $5B or $10B euqity injections with no strings attached.
I found it interesting that this same story came out about Merrill Lynch over Christmas vacation in the British Press. Text in bold is my emphasis. From Yahoo:
Citigroup Inc. and Merrill Lynch & Co Inc. are in discussions to receive more capital from investors, primarily foreign governments, The Wall Street Journal reported on Thursday.
Citigroup could get as much as $10 billion, likely all from foreign governments, while Merrill is expected to get $3 billion to $4 billion, much of it from a Middle Eastern government investment fund, the report said.
The report also said Citigroup's board is expected to discuss cutting the firm's dividend in half, a move that could save it more than $5 billion a year.
Representatives were not immediately available for comment at either bank.
U.S. banks have been wrestling with huge subprime mortgage losses, prompting some to seek cash from sovereign wealth funds.
In December, Merrill Lynch shored up its capital base by as much as $7.5 billion after selling a stake to a Singapore government investment fund and an asset manager. Morgan Stanley has said it would receive $5 billion from China after recording $9.4 billion of writedowns.
Citigroup in November agreed to sell up to a 4.9 percent stake to Abu Dhabi for $7.5 billion, while UBS accepted a $9.75 billion investment from a separate Singapore state fund.