The government of Qatar has begun investing in Credit Suisse (CS) and the country’s prime minister says that Middle East country is prepared to put up to $15 billion into US and European banks.
For the Swiss the deal may have some benefit. "Credit Suisse in March 2006 became the first European bank to get a license for the Qatar Financial Centre, a self-regulated business park designed to attract lenders to the Gulf state as part of a plan to diversify the economy away from oil and gas," according to Bloomberg.
The statement from the Qatar government raises two questions, one which has been causing political friction for some time. Congress and some officials in the Administration have wondered in public whether it is good for foreign sovereign funds to own very large pieces of the largest US banks. The fear is that these entities could push their financial agendas through their equity stakes. The comments by the government are absurd. Troubled banks can either take sovereign money or face the threat of going under. No one in the Congress has suggested that the US government put money into these banks, so where else will the capital to save these firms come from?
The second and more persuasive argument for the value of taking sovereign fund investing is that it improves ties between banks and the countries. With hundreds of billion of dollars in sovereign capital in need of management, banks could earn billion in money management fees. Surely banks which are partially owned by overseas governments have a better chance of managing that capital and making a profit on it.
Bring on the sovereign funds. Doings business with them could be extremely profitable.
Douglas A. McIntyre