Rumours swirl that the only entities capable of saving Bear, Stearns (BS) from being ingloriously dumped into the dustbin of Wall Street history are the Sovereign Investment Funds (SIF).
SIF--and their cousins, super-wealthy sheiks, sultans, emirs--have already participated in the mouth-to-mouth resuscitation required by Citigroup, Morgan, Stanley, UBS, Merrill Lynch and who knows how many other mega investment banks in the US and abroad.
The rescues have taken the form of these SIF injecting large amounts (billions of dollars) into the trouble institutions by purchasing equity stakes--ownership stakes--in them.
The parabolic rise in the price of oil has produced an unprecedented and largely insidious transfer of wealth from the consuming to the producing nations of that oh so necessary commodity. The USA is the number one consumer nation; on the other side of the equation stand Saudi Arabia and Putin's Russia as the number one and two producing nations, respectively.
These nations and others such as China, accumulate vast hoards of dollars. In the very recent past the investment of these dollar caches was channeled largely to USGovernment securities. In other words, they lent the money back to us; we agreed to pay them interest on their investment, and guaranteed that their principal would be returned to them at the predetermined end of the loan. The investor nations had bought themselves nothing more than a stake in the continued prosperity of the USA. They owned nothing more than a "promise." And the continued growth of the US economy was as much in their interest as ours.
But now SIF investments are being diversified into vehicles other than USGovernment bonds; and no longer are confined to merely lending money. Now SIF are purchasing assets. In and of itself, these acquisitions of US assets present no particular problem. If a Saudi "prince" wants to buy Rockefeller Center, who cares? If the UAE SIF scoffs up the MGM Grand in Vegas, let 'em.
Would it make a difference, however, if we woke up one morning to discover that Rockwell International was now under the control of KGB-Russia? Or Boeing was owned outright by the House of Saud? The financial industry is as important to US national security as is the arms manufacturing industry.
And what these bailouts of Wall Street's grandest names means is that slowly but surely the ownership of our private financial apparatus is slipping out of the hands of Americans and into the sweaty palms of nation's whose vital interests are not necessarily congruent with those of the USA.