Ben Bernanke once spoke of dropping money from helicopters, if necessary, to save an economy in distress. He probably did not envisage that choppers bearing the insignia of oil-rich Gulf states and cash-rich Asian countries would hover over Wall Street.
On January 15th the governments of Singapore, Kuwait and South Korea provided much of a $21 billion lifeline to Citigroup and Merrill-Lynch, two banks that have lost fortunes in America's credit crisis.
Sovereign-wealth funds hold a bare 2% of the assets traded throughout the world, they are growing fast, and are at least as big as the hedge-fund industry.
With as much as $2.9 trillion to invest (see article), the funds' horizons go beyond finance to telecoms and technology companies, even aerospace.
For the bosses at the companies they invest in, that may be a godsend: how nice to be bailed out by a discreet “long-termist” investor who lets you keep your job. The motives of the sovereign moneymen could be sinister: stifling competition; protecting national champions; engaging, even, in geopolitical troublemaking.
At a time when Western governments have at last learned to let the private sector run banks (however lousily it is sometimes done), it is far from ideal that state-owned funds from emerging economies should be buying stakes in them.
Until East and West even out the surpluses and deficits in their economies, sovereign-wealth funds will not go away. In the meantime, what should be done to keep the rod of protectionism off their—and the world's—backs?
Via Economist
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