There has been a major shake up in the U.S. economy this year in regards to foreign governments investing heavily in U.S. financial institutions and other businesses. Abu Dhabi's investment fund took a big stake in a U.S. company late in 2007 when it chose as its target perhaps the world's best-known financial institution: Citigroup.  

Other recent purchases by overseas investors have run along this same big-name theme. Deals this year include Dubai's purchase of a nearly 5% interest in electronics giant Sony, Abu Dhabi's acquisition of a 7.5% share in the private equity outfit the Carlyle Group, and China's $3 billion gamble on Blackstone.

Responding to these and other headlines of the same kind, when asked “How concerned are you with foreign governments directly investing in United States financial institutions?” 43% answered Concerned or Very Concerned showing that the highly informed Millionaire population is aware of the possible implications of these financial moves.

Colin Barr, senior writer at Fortune magazine, sites James Post, a management professor at Boston University, who warns “that Americans shouldn't underestimate the implications of the surge of foreign investment in U.S. companies. [Post] says the magnitude of the Citi deal -- which gives Abu Dhabi 4.9% of the bank for $7.5 billion -- is "a splash of cold water" that should wake Americans up to the consequences of the bad choices they've made in the past decade.” The Abu Dhabi purchase was made by that country's sovereign wealth fund, not by an individual sheik or prince-ling. A sovereign wealth fund is a bunch of money set aside by a government that is so far in the black that it has extra money to invest. The United States--does one need to say?--has not such moneys.

These investments can stabilize the banking infrastructure at a time that could be fraught with chaos and fear, and can increase the share price of the banks. Though the foreign investments can be viewed as both a positive and a negative move, this will not be the end of such investments and it will most likely be a topic that is heated up by continued weakness in the U.S. dollar and economy. 

Discuss this article on the forums. (0 posts) 

---