Would you like to buy an indoor ski resort in Dubai? Maybe you already have.
Andrew Sorkin makes a good point in today's column. The problem of moral hazard is often written off as a problem for "the future," less important than dealing with a present crisis. Not so. The bailouts may have encouraged more lending to other places that were perceived as good bailout prospects.
That had to be what Citigroup, with its firsthand expertise with bailouts, must have been thinking when it lent $8 billion to Dubai last year. Oh, and here’s an interesting fact: Citigroup made the loan to Dubai on Dec. 14, 2008. Take a look at the calendar – that’s after it received tens of billions in TARP funds. Citigroup’s chairman, Win Bischoff, said at the time, “This is in line with our commitment to the U.A.E. market in general, and reflects our positive outlook on Dubai in particular.” Good call.
No ‘effin way. One bomb and it’ll all fall like a house of cards: just wait.
“Financial metrics”? You just have to talk to any of the young things you know who have been to Dubai recently – even they could see it was all lunacy.
I think you’re forgetting that some of the largest shareholders in Citigroup are from the emirates.
More proof that today’s so called ‘liberals’ and ‘conservatives’ (from Bush to Obama) have no idea what financial conservatism means and are in fact, radicals.
Join the Green Party, which was against the corporate bailouts from the start.
18 months ago, any number of academics and pundits were quoting the rhyme “Dubai, Shanghai, Mumbai or the highway.” So although it’s disappointing that the head of Citigroup isn’t smarter than Ian Ayres or Thomas Friedman, it isn’t really surprising.
Y81 must be high, he said that Tom Friedman is an academic.
Ed wrote: “For some reason I always assumed that many of these loans were made for criteria other than the financial metrics I was taught at business school.”
Why were you learning financial metrics at business school? You should have been making contacts, so you could later arrange deals to your mutual benefit. The financial metrics can be handled by the people you hire.
This is an ancient principle, dating back as far as history can trace schools, and achieving perhaps its purest form in the British public system. The sons of peers didn’t read Classics at Eton because they were hoping to write treatises on Aristotle, and the quality of the lectures at Harvard Business School certainly doesn’t justify the tuition.
What a minute. Doesn’t Abu Dhabi own about 5% of Citigroup? It did back in the Spring of 2008.
http://emirateseconomist.blogspot.com/2009/12/will-us-taxpayers-be-left-holding-dubai.html
At least according to wiki, Citigroup is ~15 percent owned by Kuwait, Abu Dhabi, and Saudi Arabia. Why do I doubt this was Win Bischoff’s investment call?
Actually, an anonymous commenter on my blog reminds me that “Citi has not lent $8bn to Dubai per se, it was forced to SAY it had ARRANGED $8bn of loans for Dubai to keep the powers that be happy, and as a sign of support for the emirate. But arranging loans is not the same as actually lending the cold hard cash. I think nearly $6bn of this was a single syndicated loan to Investment Corporation of Dubai, which was a club deal with dozens of banks.”
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