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Alan Tonelson was on CNN's Glen Beck Show. Here is the transcript:
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CNN
November 28, 2007 Wednesday
SHOW: GLENN BECK 7:00 PM EST
BECK: ...Coming up, a weakened economy is taking its toll on major U.S.
businesses. But don`t worry, plenty of foreign investors circling, and
they`re waiting to pounce. And the good news is they`re foreign
governments. That`s tonight`s "Real Story," and it`s coming up next....
(read more)
By now you probably have heard that Abu Dhabi has agreed to pump in
$7.5 billion into Citigroup yesterday. Come on, stay with me. This is
important. While the markets and the media spent the day cheering, the
"Real Story" is, like everything in life, this deal has come at a very
large price. What was underreported by most of the media was that
Citigroup apparently was so desperate for cash that their chairman
actually flew to Abu Dhabi to pitch the deal.
Consequently, since beggars can`t exactly be choosers, Citi gave up
nearly 5 percent of the company and they are paying way above market
interest rate to their investors. While Citigroup shareholders will
eventually have to pay the price, this deal actually affects you, and
here`s why.
Abu Dhabi made this investment with something called a foreign
sovereign wealth fund. These are basically vehicles through which
governments can invest in companies and property in foreign countries.
These are governments doing it. They`re huge. Because of the massive
oil profits right now, some analysts say that within five years these
sovereign investment funds may have over $10 trillion to spend.
To put that into perspective, that`s over three times more than the
entire budget of the United States of America in 2008. Here`s the real
problem. It`s not their size. It`s their ownership. It`s the secrecy.
Unlike hedge funds, this money is controlled by foreign governments in
secret. So the investments aren`t always about profits. They`re also
about politics.
For example, China, which has $200 billion in their fund to spend,
recently invested $3 billion in a U.S. company called Blackstone. Big
deal, right? It is. Blackstone has holdings that include a firm that
creates software used by our military.
Anybody ever heard of back doors or hackers? There is a real threat
that in the years to come large portions of American property and
business may be owned by foreign governments, not foreigners but
foreign governments.
That means not just a loss of security. It means a loss of sovereignty
as well. Alan Tonelson is the U.S. Business and Industry Council
Educational Foundation.
Alan, do I have this right? Am I overstating or understating this problem?
ALAN TONELSON, U.S. BUSINESS & INDUSTRY COUNCIL: I think you hit
the nail right on the head. These sovereign wealth funds pose not only
major economic challenges, they pose national security challenges. And
the reason mainly is that most of the foreign governments that are
operating them are clearly not America`s friends.
As you noted, one of the biggest sovereign wealth funds is run by the
Chinese government. The Chinese government has been identified by the
U.S. Defense Department as the major potential national security
challenge facing the United States in the years and decades ahead.
And not only have we let them have access in theory to a U.S. company
that makes defense-related software, about a month ago the U.S.
government decided it was going to allow a Chinese government-related
technology firm called Huawei to go in on a big deal to acquire the
American technology company 3Com.
3Com makes network security hardware and software for the U.S. Defense Department.
BECK: This is incredible.
TONELSON: It is incredible.
BECK: Let me take you back here for a second. Let me go back to
Citigroup. Everybody in the press, everybody is saying oh, this credit
crisis is not that big of a deal. When you have the new head of
Citicorp flying to the Middle East in the 11th hour on a Thanksgiving
Day weekend, don`t tell me -- and he`s paying this kind of interest
rate, don`t tell me that we`re not in real, real trouble.
If this is Citigroup, good God almighty, what are the rest of the banks like?
TONELSON: And like you said, not only did Citigroup put together this
deal -- or scramble it together at the last minute, they`re paying
through the nose. And two big problems that I see right now is, one,
nobody knows what Citigroup`s obligations are and debts are in this
toxic subprime market.
They`re talking about figures like $15 billion. But the scariest fact
is no one really knows because all of these new investment instruments
that became so popular in recent years are so opaque. Nobody can
understand them, and nobody can see through them.
BECK: I saw.
TONELSON: The second problem is that these foreign government investors
often buy at the top of the market. You mentioned Blackstone just now.
Just before they bought -- just before the Chinese government bought
into Blackstone, Blackstone went public. OK?
Right after Blackstone went public the stock tanked.
BECK: So they`re not really the smartest investors, either.
TONELSON: Not at all.
BECK: Gang, this is all due to our debt.
TONELSON: Exactly.
BECK: Alan, thank you very much.
TONELSON: My pleasure.
BECK: Now, our economy is so overextended, it is so fragile right now,
and you are not getting the truth on this. And it is simply because of
our existing obligations. We are spending money too much. And I`ve got
to laugh every time I hear these debates....
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