During the weeks of uncertainty, Godolphin and Dubai representatives of Sheikh Mohammed assured the racing community that the problems of Nakeel (a subsidiary corporation of Dubai World) would not affect his racing operation nor would it affect MGM's bid to run Aqueduct's racino
It will not affect the Emirates National Oil Company takeover of Dragon Oil, London-listed £2.3 billion Caspian Sea producer.
Citizens of Dubai and the UAE have been hurt and shocked at the media frenzy which exaggerated the liquidity problems of Dubai World and portrayed the country as being in free fall.
Much of that frenzy appears to have been generated by Rupert Murdoch's various international media operations. The Times of London in particular skewed their reports to exclude positive reports from official international financial services organisations.
Instead it published comments from dissident British former Dubai residents and Durham University professors who called for Sheikh Mohammed's removal from office.
Murdoch has several country leaders on his hit list and he is using his media against Barach Obama, Gordon Brown, Silvio Berlusconi and now Sheikh Mohammed.
He published Sarah Palin's book and is financing her sales/political-campaign tour through his media enterprises, i.e., Fox News, and employees.
Dubai World had the $4.1 billion on hand which was due today for payment and is meeting with bank creditors to negotiate a standstill on debt. It will eventually sell some of its foreign assets.
Abu Dhabi loaned Dubai World a further $10 billion to cover Dubai World's business needs until the end of April and bills owed to creditors and contractors.
Confidence had returned to the Middle Eastern markets last week, but they jumped 10% yesterday after Abu Dhabi's announcement.
The delay in making the loan and an odd, early announcement that Abu Dhabi would not temporarily cover the debt has damaged both Dubai's and the UAE's credit worthiness.
One has to wonder why it took the oil-rich Emirate so long to change its mind.
Abu Dhabi Refuses to Bailout Dubai Debts, UK Has A Big Problem The Wrecking Crew
SECOND UPDATE: The International Monetary Fund will monitor the financial negotiations which started November 30 and will help stabilise Dubai's debt situation.
Surprising that no expert or journalist has mentioned that two of the multiple causes of Dubai's plight is that Arab countries are pegged to the much-devalued US$ and to fluctuating oil/gas prices.
The Gulf Council considered changing from US$ to Euros, but did not after considerable pressure from the IMF. They have all lost a lot of money.
UPDATE: Dubai World has lined up Deloitte and Rothschild to represent them next week in renegotiating loan contract payment terms with its lending banks.
KPMG will represent the lead banks including HSBC, Royal Bank of Scotland (RBS), Lloyd's Banking Group and Standard Chartered. They expect to form a steering committee of five to six banks to represent the lenders.
Since most of the exposed banks are British, the Financial Services Authority is requesting assurances that UK banks will not suffer huge losses.
The Central Bank of the UAE will monitor progress and has offered emergency aid to any bank needing it so that the nation's financial reputation is protected (which means Abu Dhabi will be involved).
Dubai World has steadfastly refused to be pressured into asset sales of their more valuable properties in the world's current low value climate to pay for the troubled Nakeel (latest word is that Nakeel will meet their December $3.5 billion bond payment).
UK banks have a poor case in some instances in that they made loans on properties which were government-related projects, but not guaranteed by the Dubai governement.
Again, the banks expect to be bailed out for their greed, failure of due diligence and poor management.
Legally, Sheikh Mohammed or the Dubai government cannot be forced to pay them. Nor can the National government.
Dubai and the UAE governments are proceeding in good faith to buy time and work out payment problems.
ANNOUNCEMENT: The UAE's richest Emirate Abu Dhabi just announced that it would only back the Sovereign debt of its cousins in Dubai on a case-by-case basis. This announcement has created an unnecessary panic.
Dubai has just lost the understood 'implicit guarantee' for its Sovereign debt by Abu Dhabi and that damages its credit worthiness as an Emirate. Why has Abu Dhabi pulled the plug?
Rumours that Dubai's debt was overextended, rampant over the last few years, have been confirmed by Dubai during the Thanksgiving and Eid holidays (US and Middle Eastern markets closed).
Dubai has asked for a debt moratorium on $50+ billion credit loans for Dubai World which is the government-owned holding company founded in March 2006 to manage four main arms of investment: transport and logistics, drydocks and maritime, urban development, investment and financial services.
Economists say the first two categories are advanced in infrastructure and in excellent financial condition. They form the basis of a renewal of and support to Dubai's stature as an international trading hub.
Dubai, like much of the world, expanded its urban development and local financial investment at a time just before the international financial services' industry melted down.
Their debt is not high compared to other countries, but they could be forced to default at a time when many countries' Sovereign funds are under scrutiny. The Ukraine is the top of the suspect list and the State of California (USA) is number 10.
Complicating matters is that the Ruler of Dubai, Sheikh Mohammed, holds a majority stake in Dubai World. His personal (business-related) debt added on is said to extend the Dubai debt to $80+ billion.
Dubai has been criticised for a lack of transparency in not revealing the debt situation sooner. Markets lost billions of dollars over the holiday with the 'shock' news.
'Shock' is disingenuous; it is just more mismanagement of international financial markets.
RBS, HSBC and the Standard Bank hold most of the debt which will mean that British taxpayers will be stung for the losses in these bailed-out banks if a solution is not found.
Many of the top executives of Dubai-based companies are British and could lose their jobs.
Thousands of British jobs, especially in the racing industry, and a huge chunk of British gross national product are dependent on Dubai and its Royal Family.
In the end, Britain needs to agree to a moratorium and work with Sheikh Mohammed to sort the mess.
Part of Dubai's problem is simply timing. Prime Minister Gordon Brown is smart enough to understand that.
Dubai is one of the most exciting country developments in the world engineered by a marketing genius. It should NOT be allowed to fail.
I fully endorse Mr Black's view of the Wrecking Crew in the following article (Writings) and agree with his advice.
I have the dubious honour of having had Milton Freidman as an advisor at the University of Chicago. He fully explained his market-based model to me. My objection to the model, as I explained to him, was that there was no place for people except for the predators at the top of the market. He did not deny it, but instead suggested I was a Keynesian.
We have seen country after country brought to near destruction by supply-side economics, Freidmanomics, Reaganomics, Thatcheromics and the Clinton/Bush globalomics.
George Herbert Walker Bush rightly called it "voo-doo economics" and he lived to see his son destroy America's economy and international standing with it.
Is there any wonder that China will not pick up any more of U.S. debt?
The Wrecking Crew
Assoc. Professor, Univ. of Missouri, Kansas City; Sr. regulator during S&L debacle
Posted: November 23, 2009 10:43 AM on Huffington Post
Tom Frank's book, The Wrecking Crew explains how the Bush administration destroyed effective government and damaged our social fabric and our economy. The Obama administration has chosen to reward two of the worst leaders of Bush's crew -- Geithner and Bernanke -- with promotion and reappointment. Embracing the Wrecking Crew's most destructive members has further damaged the economy and caused increasing political and moral injury to the administration.
Last week was a bad one for Geithner and Bernanke. Senator Dodd said that Bernanke's confirmation was no longer a done deal. The House Financial Services Committee revolted against the administration, the Fed, and Chairman Barney Frank. It voted for a strong bill to audit the Fed. Senate Banking Chairman Schumer went to a conference at Columbia University -- where a generation of students salivated at the prospects of Wall Street wealth -- and was overwhelmed by an audience denouncing the continuing stranglehold of the finance industry over successive administrations and the Congress.
Neither Barney's blarney nor Schumer's schmooze was any avail before an outraged public.
The administration promptly secured a column in the Washington Post claiming that the effort to fire Geithner "buoy[ed]" him because, as the subtitle to the article explained: "Even ex-Bush aides sympathetic, sources say." The article didn't note that Geithner is an "ex-Bush" senior official who, with his fellow "ex-Bush aides" (particularly Bernanke and Paulson) produced a chain of disasters: the bubble, an "epidemic of mortgage fraud" by lenders, the Great Recession, and the scandalous TARP and AIG bailouts. Of course they're "sympathetic" to a fellow member of the Wrecking Crew that destroyed effective regulation and turned the nation over to Wall Street. The craziest part of the story is that the anonymous Obama administration flack that spread this anecdote believes that we should support Geithner because his fellow members of the Bush Wrecking Crew empathize with him because they, too, have been criticized for wrecking the economy.
The Washington Post article then offers a metaphor that serves as an apology for the Bush Wrecking Crew. The metaphor is driving over a cliff: "'Secretary Geithner has helped steer the American economy back from the brink, and is now leading the effort on financial reform,' White House spokeswoman Jen Psaki said." Geithner pushed back against Republicans who questioned his performance, telling them, "you gave this president an economy falling off the cliff."
You? How about we? Bush's financial Wrecking Crew "gave this president an economy falling off the cliff." Geithner was President of the Federal Reserve Bank of New York from October 23, 2003 until President Obama chose him as his Treasury Secretary. He was supposed to be the lead regulator of many of the largest bank holding companies. His failures as a regulator were a major cause of the "economy falling off the cliff." Bernanke held prominent positions in the Bush administration from 2002 to the end of the administration and failed as a regulator an economist. Geithner and Bernanke failed to regulate even after the FBI publicly warned in September 2004 that (1) there was an "epidemic" of mortgage fraud and (2) it would lead to a financial crisis if it were not contained. Their refusal to take responsibility for the harm they inflicted on our nation as leaders of Bush's financial Wrecking Crew adds to their unsuitability. Rewarding their perennial failures with a promotion and reappointment represents a dereliction of duty by the Obama administration.
The administration apologists praise Geithner and Bernanke for "steer[ing] the American economy back from the brink." Greenspan, Paulson, Bernanke, and Geithner were the leaders of Bush's financial Wrecking Crew. They were the guys blinded by their pro-Wall Street ideology that drove the car 120 mph down an icy mountain road and lost control of it. They took us to the "brink" of running "off the cliff" and creating the Second Great Depression. The bizarre claim is that we should praise them because they, and Wall Street, only wrecked the economy -- they haven't (yet) utterly destroyed it.
Under their metaphor, we're supposed to cheer Geithner and Bernanke because once they finally figured out that they were careening toward the cliff, they decided to sideswipe a row of trees in order to avoid going over the edge. They wrecked the car but they walked away from the crash without a scratch. If your teenager gets drunk, speeds, crashes into a school bus (injuring dozens of kids), and flips the Ford Focus -- but walks away from the crash -- you don't praise him, give him the keys to the family minivan, and have him drive the soccer team to practices. You take all the keys away from him and ground him.
The Obama administration promoted Bush's architects of the financial disaster and demands that we hail them as heroes. President Bush was ridiculed for saying: "Brownie, you're doing a heck of a job." FEMA administrator Michael Brown stood by while Hurricane Katrina reduced a single large city to ruin. Geithner and Bernanke stood by while scores of large cities were devastated.
I suggest that we will build on the momentum we've achieved on the Fed audit by making the following issues our near term financial priorities:1. Can the Wrecking Crew. Fire the senior leaders of Bush's and Clinton's financial Wrecking Crews and stopping treating them as financial experts. President Obama should not reappoint Bernanke as Fed Chairman. He should dismiss Geithner and Summers and cease to take any advise from Rubin. Replace them with the Reconstruction Crew -- people with a track record of getting things right and being effective economists, regulators, and prosecutors. Members of Bush's financial Wrecking Crew run far too many regulatory agencies, often as "Actings." They can, and should, be replaced promptly.
*"Being There" is a Jerzy Kosinski book which he adapted to the screen in 1979 with Peter Sellers playing Chance, a simple-minded Washington, D.C. gardener who was made homeless when his employer died. He had no education except from television. In his wanderings, he encounters powerful political insiders. Since he only knows what he learned on television, he can only repeat what he heard over the years. His comments are taken as profound and the political elite enlists his advice on national policies and strategies.