Gov. Perry Backs Resolution Affirming Texas’ Sovereignty Under 10th Amendment

AUSTIN – Gov. Rick Perry today joined state Rep. Brandon Creighton and sponsors of House Concurrent Resolution (HCR) 50 in support of states’ rights under the 10th Amendment to the U.S. Constitution. “I believe that our federal government has become oppressive in its size, its intrusion into the lives of our citizens, and its interference with the affairs of our state,” Gov. Perry said. “That is why I am here today to express my unwavering support for efforts all across our country to reaffirm the states’ rights affirmed by the Tenth Amendment to the U.S. Constitution. I believe that returning to the letter and spirit of the U.S. Constitution and its essential 10th Amendment will free our state from undue regulations, and ultimately strengthen our Union.” A number of recent federal proposals are not within the scope of the federal government’s constitutionally designated powers and impede the states’ right to govern themselves. HCR 50 affirms that Texas claims sovereignty under the 10th Amendment over all powers not otherwise granted to the federal government. It also designates that all compulsory federal legislation that requires states to comply under threat of civil or criminal penalties, or that requires states to pass legislation or lose federal funding, be prohibited or repealed. HCR 50 is authored by Representatives Brandon Creighton, Leo Berman, Bryan Hughes, Dan Gattis and Ryan Guillen.
	CONCURRENT RESOLUTION
	WHEREAS, The Tenth Amendment to the Constitution of the
	United States reads as follows: "The powers not delegated to the
	United States by the Constitution, nor prohibited by it to the
	States, are reserved to the States respectively, or to the people";
	and
	WHEREAS, The Tenth Amendment defines the total scope of
	federal power as being that specifically granted by the
	Constitution of the United States and no more; and
	WHEREAS, The scope of power defined by the Tenth Amendment
	means that the federal government was created by the states
	specifically to be an agent of the states; and
	WHEREAS, Today, in 2009, the states are demonstrably treated
	as agents of the federal government; and
	WHEREAS, Many federal laws are directly in violation of the
	Tenth Amendment to the Constitution of the United States; and
	WHEREAS, The Tenth Amendment assures that we, the people of
	the United States of America and each sovereign state in the Union
	of States, now have, and have always had, rights the federal
	government may not usurp; and
	WHEREAS, Section 4, Article IV, of the Constitution says,
	"The United States shall guarantee to every State in this Union a
	Republican Form of Government," and the Ninth Amendment states that
	"The enumeration in the Constitution, of certain rights, shall not
	be construed to deny or disparage others retained by the people";
	and
	WHEREAS, The United States Supreme Court has ruled in New
	York v. United States, 112 S. Ct. 2408 (1992), that congress may not
	simply commandeer the legislative and regulatory processes of the
	states; and
	WHEREAS, A number of proposals from previous administrations
	and some now pending from the present administration and from
	congress may further violate the Constitution of the United States;
	now, therefore, be it
	RESOLVED, That the 81st Legislature of the State of Texas
	hereby claim sovereignty under the Tenth Amendment to the
	Constitution of the United States over all powers not otherwise
	enumerated and granted to the federal government by the
	Constitution of the United States; and, be it further
	RESOLVED, That this serve as notice and demand to the federal
	government, as our agent, to cease and desist, effective
	immediately, mandates that are beyond the scope of these
	constitutionally delegated powers; and, be it further
	RESOLVED, That all compulsory federal legislation that
	directs states to comply under threat of civil or criminal
	penalties or sanctions or that requires states to pass legislation
	or lose federal funding be prohibited or repealed; and, be it
	further
	RESOLVED, That the Texas secretary of state forward official
	copies of this resolution to the president of the United States, to
	the speaker of the house of representatives and the president of the
	senate of the United States Congress, and to all the members of the
	Texas delegation to the congress with the request that this
	resolution be officially entered in the Congressional Record as a
	memorial to the Congress of the United States of America.

Fargo Forum Alternative: How Will History Remember GW Bush?

A uniter not a divider, I am the decision-maker, a compassionate conservative, mission accomplished, bring it on, stay the course, axis of evil, etc... are all terms that will forever be etched in the minds of Americans concerning George W. Bush #43. Like him or not, this President has drawn the ire of liberals and the contempt of conservatives.

But what should this president be remembered for?

* No terrorist attacks on our soil after 9/11- credit President Bush
* Inherited a recession and employed two major tax cuts to revive economic growth - credit President Bush
* Held firm to sanctity of life issues with embryonic stem cell research - credit President Bush
* Sent 21,000 more troops into Iraq staying the course in the bleakest of moments - credit President Bush
* Appointed Alito & Roberts to the Supreme Court - credit President Bush
* 4 1/2% unemployment, record wealth creation, main street prosperity, & wall street prosperity - credit President Bush
* Peace initiatives between Palestinians and Israelis - credit President Bush


It is clear that President Bush has drawn an inside straight since November 2006, after losing the House and Senate rather embarassingly. The above achievements will go down as credible victories for a president besieged by liberals and even conservatives who left his side against the fight on the war on terror.

Pundits can rip the president apart today. But history will have the last say about President Bush. I do believe that history will receive this man more kindly than contemporaries receive him today.

Fargo forum Alternative: Global Cooling?

Global Warming Jihad

"Popular opinion is the greatest lie in the world," declared Thomas Carlyle.

Enter Al Gore. A privliged Senator's son, a former Vice President, a Global Warming Jihadist, and of course - a Nobel Peace Prize winning statesman right next to Yasser Arafat, who now more than ever -

Mr. Gore has a popular opinion.

This superstar global doomsayer has put on his green cape traveling the world preaching global jihad against industrialism. It is possible that no man today will effect such a profound change in politics, religion, and economics since Einstein's Manhattan Project or Darwin's Theory of Evolution, or Guttenberg's printing press. And thats after losing his presidential bid!

Yet, it is rather difficult to buy the whole enchilada that the sky is falling, the earth is crumbling, and mankind is nearly beyond a point of no return unless he acts now to save himself. Isn't this Al Gore's message to America? And to the world?

An excerpt of an interview with Grist Magazine in May 2006, this caped green crusader provides an answer:

"In the United States of America, unfortunately we still live in a bubble of unreality. And the Category 5 denial is an enormous obstacle to any discussion of solutions. Nobody is interested in solutions if they don’t think there’s a problem. Given that starting point, I believe it is appropriate to have an over-representation of factual presentations on how dangerous it is, as a predicate for opening up the audience to listen to what the solutions are, and how hopeful it is that we are going to solve this crisis."

An over-representation of the facts? This is what we get from Al, the environmentalist? That maybe we aren't in a heap of trouble yet- but why wait to get there when we can yell fire in a crowded theater where the Americans are watching their movie? So apparently lying to the American people; not telling them the version of the story that is most accurate is justifiable for personal political gain???

A man's words is the test of his character. Note how often this global crusader of Green Jihad has exaggerated or outright lied through his career, according to The Free Republic:

shows an amusing 16 lies or exaggerations are tied to this green caped crusader of global warming.

What's the point of dredging up a closet full of old bones?

Because the famous Green Caped Crusader is famous for not leveling with public!

Gore may have written "An Inconvenient Truth". But the real "inconvenient truth" occurs when Gore's test of character is quesitoned concerning his honesty. Superman's weakness was cryptonite. Gore, the green caped craseder's cryptonite is his imaginative fabrications that have come so naturally over the years.

Whether it was Love Canal, creating the internet, or the Buddhist fundraising scandal, trusting Gore is like trusting "Slick Willie" to honor Hillary all the days of his life. Does anyone believe that Gore can honor the truth to a greater degree than his former boss can honor Hillary?

Strange as it may sound, when Gore was just Vice President we were OK. But now as the international coronated king of Jihad against Carbon Emissions, the world has panicked. The effect may well be felt in our wallets with significantly higher taxes.

Single-handedly Al Gore has propelled the world of nations to act upon the desperate global warming issue whether or not the facts support action. A world hero, Gore, has taken the mantle to mock and taunt the Bush administration's perceived failture to act to save the world from mankind. The Green Goracle™, never one to miss a chance to blame the United States in general and George Bush in particular for just about anything, told the delegates that the U.S. was “principally responsible for obstructing progress here in Bali.”
So what are we to do with a former Vice President who has a Messianic Complex to save Americans and the world from global warming? What can we do? Let the foolish dribble their opinions; let the facts illuminate the truth. In thirty years Gore may have found a new cause: global cooling???

Fargo New Media: US cities face crushing debt burden and Infrastructure Losses.

One of the central features of the current US economy is the trillions of dollars of debt being accumulated by corporations, consumers and all levels of the government. While it is barely mentioned in the mass media, major US cities have accrued an enormous debt burden to finance their day-to-day operations.

With the cutback in federal aid, the loss of state revenue-sharing and the massive tax breaks provided by city officials to attract corporate investment, municipal governments have turned towards Wall Street for a short-term solution to their budget woes. The municipal bond market—now valued at $1.9 trillion—has become one of the most lucrative businesses for investment banks, brokerage firms and their army of lobbyists and consultants.

This process has resulted in a windfall of profits for wealthy investors, who have gained unprecedented access to the public treasury. In order to pay off their debt obligations, financially-strapped cities have been forced to cut funding for infrastructure repairs, education and other vitally-needed public services, and sell off municipally-owned utilities and other assets to raise cash.

The latest example is the city of Detroit. Long beset by problems associated with the decline of the US auto industry that have turned the Motor City into the poorest big city in the US, the city has faced almost perennial budget deficits. Earlier this year, Democratic Mayor Kwame Kilpatrick announced a budget-cutting plan to reduce the city’s $350 million deficit that included the elimination of nearly 1,000 city workers’ jobs, cutting wages and benefits and ending 24-hour-a-day bus service. On April 12, Kilpatrick announced further cuts, including the virtual elimination of all subsidies for the arts, zoos and other “non-essential” programs, as well as cutbacks in firefighting and EMT services.

Kilpatrick also proposed to float $1.2 billion in municipal bonds to finance the city’s under-funded pension plan and other budget shortfalls. The city council, which first opposed the deal, unanimously voted to approve it after the mayor announced he would lay off 2,000 city workers if the bond deal didn’t pass. So far, 3,000 city workers have been dismissed in the last three years.

In essence the city is using the hard-earned pensions of current and future retirees, as well as other public assets, like the city-owned water treatment plant, as collateral to guarantee Wall Street repayment of its loan, plus millions in interest payments. At the end of 2004, the Detroit retirement system had assets totaling $2.5 billion, according to the pension board. At the same time the Kilpatrick administration is continuing to cede unprecedented authority to wealthy investors to dictate the city’s fiscal policy, including reducing retiree benefits.

During a four-hour City Council meeting, a fiscal analyst from the Wall Street rating company Standard & Poor told council members that “pension boards would have to resist demands for better retiree benefits and distribution of excess profits” in order for the bond deal to succeed.

When a city council member expressed concern over what would happen if the city defaulted on its loan, while still remaining obligated to pay retirees their money, the mayor arrogantly responded, “So what,” according to a report in the Michigan Citizen. The mayor insisted, “We’ve already told Wall Street we would use the pension obligation certificates to close the gap in our budget.”

For almost a year, the Kilpatrick administration worked with UBS Financial Services to sell the bond proposal. The middleman who laid the groundwork between the city government and the investment bank was none other than Dennis Archer, the former mayor of Detroit. During his eight years in office, the Democratic mayor handed over hundreds of millions of dollars in tax breaks to corporations and contributed to the financial crisis that working people in Detroit are now paying for.

At the end of 2004, the city of Detroit was scheduled to pay almost a billion dollars on bonds, notes and debts. Of that nearly $366 million was for interest payments alone. Kilpatrick claims the new bonds will save about $13 million a year because of lower interest rates during the 15-year life of the bond certificates.

Detroit is following the pattern set by municipal governments in New Orleans, Pittsburgh and other major cities throughout the US. Cities and states have to pay a fixed rate of interest on the bonds, and are essentially betting they can earn a higher rate of return by investing their pension funds in the stock market.

The losses on pension investments over recent years have put municipal governments in the red, not only to cover the cost of their pension obligations but also the interest payments on the newly-purchased bonds. According to an October 2003 analysis from the advocacy group Global Action on Aging, many cash-strapped cities have been lured into stocks and commercial money markets with promises of high returns on their pension investments, which have never panned out.

In New Orleans, for example, a bond deal finalized in late 2000 ended up costing the city $270 million. “We were thinking that we were going to make money on it,” said, Suzy Mague, fiscal officer for the New Orleans city council. Mague said PaineWebber claimed New Orleans would probably have to pay about 8.2 percent on the bonds and could expect to earn 10.7 percent a year, on average, by investing the proceeds, mostly in stocks.

This rosy scenario was based on the returns from 1983 to 1999, a period that saw the greatest bull market in history. When the market fell sharply, instead of earning 10.7 percent on their pension investments, New Orleans suffered losses of about 3 percent a year. For its role in the bond sale PaineWebber, which later merged with UBS, collected a $3 million fee.

Pittsburgh, which like Detroit has suffered the erosion of its industrial base, owes $1.68 billion in total debt. Between now and 2011 the city has to pay at least $82.8 million annually—or nearly 20 percent of its yearly budget—toward the debt, assuming it doesn’t borrow more. In the late 1990s the city sold $404 million in bonds to cover its pension obligations and other debts. Placed under financial receivership, Pittsburgh sold off its water and sewer operations to a private water company in 2001 to help pay off its debt to Wall Street.

In January, Wall Street upgraded Detroit’s credit rating from a negative to stable outlook. The message to big business is: now is a good time to invest in Detroit at the expense of its low-income and working class citizens!

The Kilpatrick administration is currently considering selling off Detroit’s water system and lighting utility to private corporations. The city took a step in this direction, when it hired Victor Mercado from the British-based water conglomerate Thames Water North America to run the Detroit water department and began the shut-off of water supplies to tens of thousands of poor people who failed to pay their bills.

The mayor recently closed the century-old aquarium on Belle Isle Park, the 983-acre island park designed by the creators of New York’s Central Park. Further mass layoffs in the future are almost certain, given the relentless demands placed upon the city government by Wall Street bond investors.

Demands for austerity measures and the wholesale selloff of public assets are familiar for Third World countries facing the dictates of the International Monetary Fund and World Bank. Now almost every large US city is being subjugated to the same predatory lending practices and austerity measures as the less developed countries.

The historical precedent for the restructuring plans being imposed on US cities by Wall Street was set in 1975 when New York, the country’s largest city, was on the verge of financial collapse. At the insistence of Wall Street, the Municipal Assistance Corporation—formed by the state government and representatives of big business—the city government laid off thousands of city employees, implemented wage freezes, increased subway fares, and abolished free college tuition for students at the City University of New York.

Today Democratic-controlled city governments, like the Kilpatrick administration in Detroit, are gambling with the pension funds of workers and selling off public assets, much in the same way as the Bush administration proposes to privatize Social Security. In both cases the fate of retirees and the welfare of the general public are being put in the hands of billionaire financial speculators.

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Fargo New Media: Its official the Arabs will literally own us.

Citigroup Borrows $7.5 Billion 11% interest yikes! OMG more like it.
Citigroup Inc., the biggest U.S. bank by assets, will receive a $7.5 billion cash infusion from Abu Dhabi to replenish capital after record mortgage losses wiped out almost half its market value.

Citigroup rose 2.6 percent in New York trading today following acting Chief Executive Officer Win Bischoff's statement late yesterday that funds from the state-owned Abu Dhabi Investment Authority will help ``strengthen our capital base.''

Abu Dhabi will buy securities that convert to stock and yield 11 percent a year, almost double the interest Citigroup offers bond investors, underscoring the New York-based company's need for cash. Fourth-quarter profit will be reduced by as much as $7 billion because of losses from subprime mortgages, which led to the departure of CEO Charles O. ``Chuck'' Prince III and a 46 percent slump in its stock this year.

``Clearly, Citi has a problem with capital adequacy after the subprime crisis,'' said Giyas Gokkent, head of research at National Bank of Abu Dhabi PJSC, Abu Dhabi's biggest bank by market value. ``ADIA has seen an opportunity to get cheaply into a blue-chip stock.''

With the purchase of a 4.9 percent stake, Abu Dhabi, the largest emirate in the United Arab Emirates and its capital, would rank as Citigroup's largest shareholder ahead of Los Angeles-based Capital Group Cos. and Saudi billionaire Prince Alwaleed bin Talal, data compiled by Bloomberg show.

Depleted Capital

The investment follows purchases by U.A.E. fund Dubai International Capital LLC in companies including London-based HSBC Holdings Plc, Europe's biggest bank by market value, and New York-based hedge fund Och-Ziff Capital Management LLC. In Abu Dhabi, state-backed Mubadala Development Co. agreed to buy 7.5 percent of Washington-based buyout firm Carlyle Group. ADIA also owns a stake in Leon Black's New York-based buyout firm, Apollo Management LP.

Citigroup Chairman Robert Rubin, who stepped in after Prince resigned, and Chief Financial Officer Gary Crittenden said on a conference call earlier this month that the bank expects to restore capital to targeted levels by the end of the second quarter without having to cut its $2.7 billion-a-quarter dividend.

Mortgage writedowns cut Citigroup's ``tier 1'' ratio, a metric used to assess banks' ability to weather loan losses, to 7.3 percent on Sept. 30. The figure, while above U.S. regulators' 6 percent threshold for a ``well-capitalized'' bank, was below the bank's 7.5 percent target.

`Bullish' View

The Citigroup equity units that ADIA will purchase can be swapped for as many as 235.6 million shares starting in 2010. The securities will convert into Citigroup shares at prices ranging from $31.83 to $37.24 between March 15, 2010, and Sept. 15, 2011.

Today Citigroup's stock rose 78 cents to $30.54 as of 10:03 a.m. in New York Stock Exchange composite trading. Yesterday, they closed at $29.76, the lowest price in five years.

``The structure of the deal suggests that Abu Dhabi is very bullish, effectively participating in the upside beyond $37.24, and sharing in the downside below $31.83,'' said George Nikas, who helps manage $1 billion at Deutsche Bank AG in Sydney.

Abu Dhabi will have ``no role in the management or governance of Citi, including no right to designate a member'' of the company's board, Citigroup said in its statement.

``This investment reflects our confidence in Citi's potential to build shareholder value,'' ADIA Managing Director Sheikh Ahmed bin Zayed al-Nahyan said in the Citigroup statement.

Cost of Capital

Mounting subprime losses have increased Citigroup's funding costs. The bank sold $4 billion of 10-year bonds on Nov. 14, paying annual interest of 6.125 percent. The securities were priced to yield 190 basis points more than Treasuries, up from 118 basis points, or 1.18 percentage points, in a similar sale three months earlier.

CIBC World Markets analyst Meredith Whitney said in a note to clients today that she still expects Citigroup to cut its dividend as mortgage losses increase.

Abu Dhabi officials met with Rubin in the emirate yesterday to discuss ``world stock markets and their impact on the performance of banks,'' the state-run WAM news agency reported on its Web site.

Abu Dhabi owns the world's fifth-biggest oil reserves. It channels oil surpluses to ADIA, which ranks as the world's biggest sovereign wealth fund with assets of $875 billion, according to July estimates by the London-based Economist Intelligence Unit. The authority will spend $40 billion this year to buy foreign assets, estimates Gokkent at the National Bank of Abu Dhabi.

Buying Assets

Gulf investors have spent about $70 billion on overseas acquisitions this year, almost double their spending in 2006, as oil prices soared 58 percent, data compiled by Bloomberg show. With oil above $90 a barrel, Gulf producers including Saudi Arabia and the U.A.E. earn more than $1.3 billion a day from their energy sales.

State-controlled Saudi Basic Industries Corp., the biggest chemicals company by market value, in May agreed to buy General Electric Co.'s plastic unit for $11.6 billion in a record acquisition for the Gulf. State-owned Dubai World in August agreed to invest as much as $5.1 billion in MGM Mirage, the second-largest casino company, to try to tap into the Las Vegas- based company's U.S. gaming and real estate earnings.

Gulf petrodollars don't always get the prize. Qatar on Nov. 5 said it abandoned a $21.9 billion bid for U.K. supermarket chain J Sainsbury Plc after its cost of funding jumped ``significantly'' since first making the bid July 18.

China's Purchases

China also has been increasing investments in the U.S. and Europe. Bear Stearns Cos., the fifth-biggest U.S. securities firm, agreed last month to sell a 6 percent stake to China's government-controlled Citic Securities Co. for about $1 billion. China Investment Corp., the nation's $200 billion sovereign wealth fund, paid $3 billion for a stake in New York-based private equity firm Blackstone Group LP in May. Barclays Plc, the U.K.'s third-biggest lender, agreed to sell 6.7 percent of itself to China Development Bank in July.

The state-owned Dubai International Financial Center, which bought 2.2 percent of Deutsche Bank AG in May, on Nov. 19 said it is seeking acquisitions in the U.S., where the falling dollar and a lending crisis are driving down the price of banks and property.

Dubai Center

Citigroup is among tenants at the Dubai center, a business park being used to attract banks, insurers and asset managers to the Persian Gulf. Like neighbors Qatar and Bahrain, Dubai is bidding to plug the trading time gap between Europe and Asia and become the region's pre-eminent financial hub.

Qatar, like Abu Dhabi, is seeking to diversify its economy away from near-total reliance on energy earnings. Unlike Abu Dhabi, the oil wells of Dubai and Bahrain have almost run dry.

ADIA ``will bolster Citigroup's capital and competitiveness,'' U.S. Senator Charles E. Schumer said in a statement. The New York Democrat was among the lawmakers who criticized the Bush administration's decision last year to approve DP World Ltd.'s $6.8 billion acquisition of London-based Peninsular & Oriental Steam Navigation Co., a deal that gave the Dubai state-owned port company control of six U.S. terminals.

Schumer was among those who said Dubai ownership would jeopardize U.S. national security, arguing that two terrorists involved in the Sept. 11, 2001, attacks were from the U.A.E.

AIG's Purchase

DP World agreed in December to sell the U.S. terminals, in cities including New York, Philadelphia, Baltimore and New Orleans, to American International Group Inc., the world's biggest insurer.

``The issue for DP World was a misunderstanding that it might misuse its control of some U.S. ports, but that is behind us and Dubai in particular has been doing a lot of deals in the U.S. since then,'' said Mohammed Ghubash, professor of political science at the U.A.E. University in al-Ain.

Prince Alwaleed, a nephew of Saudi King Abdullah, invested $590 million in Citigroup predecessor Citicorp in 1991 when the bank needed cash because of loan losses in Latin America and a collapse in U.S. property prices. Alwaleed now holds about $6 billion of Citigroup shares. The prince wasn't available for comment at his Riyadh office today.

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Fargo New Media: Doom and Gloom Spreads

Here it is: the story behind the gloomy story
The housing situation is deteriorating. Credit markets are snarled, as lenders hoard cash. Bank earnings are down some 25%, driven by mortgage and consumer credit-card defaults and late payments, which forced banks to increase their loan loss provisions to the highest level in 20 years. Lay-offs in the construction industry are picking up speed. Consumer confidence is down, partly because oil prices are so high as to be sucking the purchasing power out of the economy; retailers fear that the Grinch has stolen Christmas. The dollar is sinking, driving the euro and the pound to levels that price European and British exports out of many markets; America’s newest export might well be a recession.

For about 15 years credit has been somewhere between cheap and virtually free. Result: lots of borrowing to buy houses, credit cards worn to the nub by hyperactive consumers, and deals by private-equity firms based on cheap loans. Now, it turns out that too much of the collateral for too many mortgages and loans is not quite as good as it was thought to be. Indeed, some of it has no market at all, which should pose a problem for auditors asked to certify a value higher than zero.

So much for a summary of the news. A popular American broadcaster attracted millions of listeners with promises of “the story behind the story”. Let me try to repeat his success.

We are indeed witnessing a credit crunch – banks are less able and less willing to lend. But banks are not the only game in town any more. Although traditional banks remain important financial institutions, there is reason to believe that their woes are less relevant to the long-run performance of the economy than they have been in the past.

Start with the commercial-property market. Banks are demanding that property developers put up 25% of their projects’ finance, compared with only 10% before the troubles started this summer, and want to see current cashflow rather than projections of future income. As a result, the issuance of securities backed by commercial mortgages dropped from about $30 billion per month to $6 billion.

But the absence of traditional banks has called into being new players, including nonUS banks, such as the Bank of Ireland, insurance companies and what The Wall Street Journal describes as “smaller real-estate shops”. So property developers are paying more, but they can get financing for sound deals.

Then there is the deals business. Small buyouts, those under $200m, are having little trouble getting the debt needed to complement the equity being put up by buyers. Sources in the City say that funding for transactions in the £200m to £400m range remains available. And not all big takeovers are being called off. Dealogic reports that companies and private-equity firms pulled off $435 billion of acquisitions in the first three weeks of last month, a 23% increase over the same period last year. European deal volume tripled. So although lenders are charging higher interest rates and demanding increased equity, the deals business is hardly at a standstill.

Most important of all is the rise and rise of sovereign wealth funds – huge aggregations of capital in the hands of the world’s oil producers and major exporters such as Abu Dhabi. China’s $200 billion pile of money looking for a home pales in comparison with Abu Dhabi’s, variously estimated at $650 billion to $1 trillion (these funds are less than transparent, so estimates of their size vary). It would be an exaggeration to say that the managing director of Abu Dhabi’s sovereign wealth fund, Sheikh Ahmed bin Zayed al-Nahyan, had only to dip into his petty-cash drawer to come up with the $7.5 billion needed to make his country the largest shareholder in Citigroup. But not much of an exaggeration. If estimates that the Abu Dhabi fund earns a return of about 10% annually are correct, the Citigroup investment represents approximately a mere one year’s earnings.

The high 11% interest rate that Citigroup will pay, in addition to giving Abu Dhabi convertible stock – the so-called equity kicker – shows how desperate the bank is to get its hands on new capital. But to leap from that to a conclusion that the credit markets are in terminal decline would be unwarranted. Citigroup was having problems long before market conditions deteriorated. It is regarded by many observers as a huge, inefficient and possibly too-big-to-manage dinosaur that should be broken up.

Besides, the banking sector as a whole is going through a long-term change that is merely compounded by current credit-market tightness. The world has changed. Wealth has moved into new hands. Morgan Stanley estimates that the world’s sovereign wealth funds hold some $2.5 trillion in assets, more than the global hedge-fund industry. And they are adding about $500 billion to their assets every year. One Gold-man Sachs banker told me that until recently he had never been to the Middle East; now he makes several trips each month.

Traditional banks, licking their wounds and trying to restore their balance sheets, are reluctantly selling off pieces of themselves to these funds, to the tune of $37 billion so far. Look for more such deals.

Also, expect these funds to take equity positions in nonfinancial companies. Equity capital from these sovereign wealth funds is replacing the debt capital that in the past 15 years greased the wheels of commerce. The result will be a healthy deleveraging of the world’s business: less debt, more equity. Since equity costs more than debt, profits will drop, but so will the risk that bad times will lead to bankruptcies and defaults – not a bad trade-off.

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