Many commentators have made the point over the last week, as James Ledbetter does here, that the supposedly laissez-faire Bush administration has now embarked on a socialist program that rivals anything Franklin Delano Roosevelt ever dreamed up during the New Deal era.
But it's not just the U.S. federal government that is moving to control the commanding heights of the American economy. Foreign firms, too, are going to be taking their pound of flesh.
The Financial Times adds some context to a move by the Federal Reserve that could make yesterday's partial sale of Morgan Stanley to Mitsubishi a lot more common in the coming days:
[T]he Federal Reserve threw open the doors to investment in the US banking industry by private equity firms, sovereign wealth funds and corporate investors – in the hope that this would direct much-needed capital to US banks.
The US central bank said it would raise the maximum stake a minority investor could take in a bank holding company from 25 per cent to 33 per cent in some instances and lift the ban on board representation for minority investors.
In other words, the Fed is making it easier for a wide array of entities -- including foreign governments -- to purchase large chunks of U.S. banks.
Can you imagine how it's going to play once Abu Dhabi Investment Council and the China Investment Corp., two of the world's largest sovereign wealth funds, start to buy up the pillars of American capitalism at fire-sale prices? Some of that has already happened, but we ain't seen nothin' yet, I'd wager.
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