Sovereign wealth funds seen saving U.S., U.K. 'financial structure'


That is, government of, by, and for the bankers.

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Citi Banker Defends Sovereign Wealth Funds

By Edmund Conway
The Telegraph, London
Thursday, January 24, 2008

Sovereign wealth funds are the effective saviours of Wall Street and the City, a leading Citigroup banker has acknowledged.

Michael Klein, chairman and co-chief executive of the markets and banking department at the world's biggest bank, launched a forceful defence of the institutions at the World Economic Forum [in Davos, Switzerland], amid growing fears that they could be used for political means.

Mr Klein said: "I would make an argument today that the greatest single benefit to the longevity of the US and UK financial structure is investment made by sovereign wealth funds into financial institutions."

After suffering record write-downs on its sub-prime investments over the past year, Citigroup has been forced to raise some $22 billion (L11.3 billion) of fresh capital from a number of investors including the Kuwait Investment Authority, in addition to Saudi Prince Alwaleed bin Talal, a major investor since the early 1990s.

The injection of cash into the US has helped major investment banks rebuild their balance sheets, but some banks have warned this has come at the price of their independence. They also speculate that foreign governments may use their investments to wield political influence in the future.

The leading US Treasury representative at the meetings, David McCormick, said: "The questions should be very much around whether that investment in future continues to be commercially-driven and in no way shifts to political" influences.

Mr Klein said: "I think what needs to be quite vigilant is making sure there is a clear understanding, and not the rhetoric that throws the baby out with the bath water."

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