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The Great American Garage Sale

If I’d had a brick, I’d have thrown it at the TV. Some economics expert had just declared that the free fall of the U.S. dollar was a boon to America’s exporters, whose products were trading at historically low prices on the world market.

Yeah, right. The problem is our leading export right now seems to be American corporations. And the buyers aren’t necessarily friendly.

Citigroup Inc., the biggest U.S. bank by assets, will receive a $7.5 billion cash infusion from Abu Dhabi to replenish capital after record mortgage losses wiped out almost half its market value.

Citigroup rose 2.6 percent in New York trading today following acting Chief Executive Officer Win Bischoff’s statement late yesterday that funds from the state-owned Abu Dhabi Investment Authority will help “strengthen our capital base.”

Abu Dhabi will buy securities that convert to stock and yield 11 percent a year, almost double the interest Citigroup offers bond investors, underscoring the New York-based company’s need for cash. Fourth-quarter profit will be reduced by as much as $7 billion because of losses from subprime mortgages, which led to the departure of CEO Charles O. “Chuck” Prince III and a 46 percent slump in its stock this year.
With the purchase of a 4.9 percent stake, Abu Dhabi, the largest emirate in the United Arab Emirates and its capital, would rank as Citigroup’s largest shareholder ahead of Los Angeles-based Capital Group Cos. and Saudi billionaire Prince Alwaleed bin Talal, data compiled by Bloomberg show.

Depleted Capital

The investment follows purchases by U.A.E. fund Dubai International Capital LLC in companies including London-based HSBC Holdings Plc, Europe’s biggest bank by market value, and New York-based hedge fund Och-Ziff Capital Management LLC. In Abu Dhabi, state-backed Mubadala Development Co. agreed to buy 7.5 percent of Washington-based buyout firm Carlyle Group.

Prince Alwaleed bin Talal is already the largest investor in News Corp. after Rupert Murdoch (puts a whole different spin on “fair and balanced”, eh?), and the Carlyle Group is a private equity firm with strong ties to some of the biggest players in the global military-industrial complex.

In addition to our banks, American highways, water companies, and other infrastructure appear to be on the block as investment bankers fall over one another to advise state and local governments on how to finance essential public projects with private money. It sounds too good to be true, but cash-starved legislators and bureaucrats are all too willing to sell off our roads, bridges, and drinking water to the highest bidders. The thing is, these investment bankers are themselves — as we see above — struggling to come up with cash.

Enter Arab investors to bail out Citicorp, Carlyle, HSBC, and others — investors who, perhaps not coincidentally, are assisting the dollar’s collapse by capitalizing on record high oil prices. In short, it appears that Western consumers of petroleum products are financing the Arab world’s gradual takeover of our investment banks and through them, our infrastructure — and possibly our foreign policy.

Some would argue that this has been the case for at least thirty years.

Step back, look at the big picture, and ask yourself: Are we seeing the start of something really unpleasant here? Or am I just a paranoid xenophobe?

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