Bush of Arabia: What All the Talk Shows Missed

For late-night talk show hosts, yukking up George W. Bush’s visit to the Middle East was like shooting fish in a barrel. Supposedly on a mission promoting peace (between Israel and the Palestinians) the President spent most of his trip rattling sabers against Iran. He spoke glowingly in Abu Dhabi of democracy, but spent most of his trip brandishing swords and holding hands with dictators who are the U.S.’s allies across the region.

One flagrant incongruity, however, seems to have gone unnoticed: Bush’s timid request to Saudi King Abdullah and other rulers in the Gulf to rein in soaring oil prices because, said Bush, they are hurting the U.S. economy.

But the point is that the current economic crisis in America was not triggered by Arab but by American greed: the disastrous mortgage melt down provoked by sub-prime loans. That collapse was the result of the Bush administration and U.S. regulatory agencies refusing to reign in the unscrupulous policies of the mortgage industry, despite repeated warnings of looming calamity.

Second point: while our media was focused on Bush’s pitch to the Arabs for lower petroleum prices—which was politely but firmly turned aside by a Saudi official—at the same time, hugely wealthy Arab investors were helping to bail out some of America’s largest financial institutions, staggering in the wake of the sub-prime crisis.

For instance, as Bush was dancing with King Abdullah, the King’s nephew, Prince Alwaleed bin Talal, was increasing his stake in Citigroup. This was not the first time the Prince had invested in the stricken company. In fact, he was already Citigroup's largest individual shareholder: Kingdom Holding, which he controls, owns 3.6% of Citirgoup. Meanwhile, the Kuwait Investment Authority, another sovereign wealth fund, with at least $225 billion in assets, announced it would invest $3 billion in Citigroup and $2 billion in a very grateful Merrill Lynch.

Those were just the latest investments by Middle Eastern sovereign funds in ailing U.S. financial institutions. Last November, the Abu Dhabi Investment Authority paid 7.5 billion dollars for a 4.9% interest in Citigroup.

The Arab investors are not acting out of altruism. As Harvard University economics professor Kenneth Rogoff put it last Fall, “some people might view Abu Dhabi as buying Citigroup at a "fire-sale price."