Will you bail out Dubai?

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.


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