In a story that moved on Bloomberg today, Saudi Prince Alwaleed bin Talal blames banks for any pain they may suffer as a result of Dubai World’s attempt to reschedule $26 billion in debt payments to creditors.
“These banks are very mature banks, and they have to differentiate between a corporate loan and a sovereign loan,” Alwaleed, 54, said yesterday in an interview on Bloomberg Television. “When things go sour, you can’t have some banks in the West going to Dubai and saying ‘oops’ and crying wolf and saying, ‘You should have guaranteed those loans.’”
Of course, as Una Galani points out in her Breakingviews.com piece today, Dubai didn’t really bother to make the same distinction Alwaleed he claims investors should have made.
Until it fell on hard times, the emirate rarely distinguished between the $26 billion of sovereign debt and the much riskier $50 billion or so owed by government-related entities, including the now-troubled Dubai World.”
And why would it? On its own web site, Dubai World notes that it was established by decree in March 2006 by HH Sheikh Mohammed Bin Rashid Al Maktoum, vice president and prime minister of the United Arab Emirates and ruler of Dubai. Its mission was to become the holding company of the operating government department and business units owned by the government of Dubai.
As if that doesn’t blur the line enough, Dubai World’s board of directors includes:
Chairman Sultan Ahmed Bin Sulayem, who is also a board member of the Dubai government’s Executive Council;
Jamal Majid Bin Thaniah, former head of the Dubai Ports Authority;
Ahmed Butti Ahmed, director general of Dubai Customs and CEO of the Ports, Maritime and Free Zone Authority;
Abdul Wahid Al Ulama, who also serves on the board of the Dubai Financial Services Authority; and
Ahmed Bin Sulayam, who is also executive chairman of the Dubai Multi-Commodities Centre, an initiative of the Dubai government.
Of course, at the end of the day, Alwaleed is right on this count: Creditors bear responsibility for the loans they make. And in this case, they also bear the responsibility for Dubai itself, which to borrow a phrase from the Stephen Root character in No Country for Old Men, is a colossal goat-bleep in the desert. It stands today, and in my opinion will represent in the future, one of the greatest misallocations of resourcesâ€”financial and otherwiseâ€”in human history. It will serve as a monument to man’s hubris and greed, and to his continued ignorance of history, climate and geography.
This debt repayment delay is only the beginning.
Headlines that Hurt
Courtesy of Bloomberg: Gartmore Is Probed by Italy Regulator in Insider Trading Case.
On a more serious note, this insider-trading craze strikes me as having legs. It’s not just hedge funds, although once again the fact that hedge funds have been involved makes for good copy. At its dark heart is a much more boring but much more pervasive story: good, old fashioned greed.