Mortgage Industry Trends

Indeed with the SWF’s by some accounts contributing over $100 billion USD during Q4 2007 alone, there is a potential for them to exert undue influence over corporate governance simply due to their opaque management approaches.  However, just like private equity (PE) and hedge funds, not all SWF’s are created equal – hence they should not be judged with a broad brush stereo type that some would like readers to believe.  After all, without their cash as of late, we could be discussing government bailouts of some of the largest and most iconic of FSI institutions.  Lacking a historic reference for judgment with these “SWF bailouts,” we must be cautious but not adopt the protectionist attitude of the nightly media and talk radio shows. 

As an American who has done business globally, many corporate leaders and politicians are ill-equipped to grasp the fundamental shifting of global wealth that is taking place.  It looks to be a permanent change.  The SWF’s are the result of this globalization of not just resources or labor arbitrage, but of productivity, energy reserves, manufacturing, and even political power.  The SWF’s know that America is not a “desolate” or “hollow” economy – we generate somewhere north of $14 trillion per year in GDP even though our deficits are excessive.  The linkage of SWF’s with PE organizations is a step in the right direction, but we need to continually reassess the intent and stakes that are being taken.

So should SWF’s be feared?  No, not yet.  Should American leaders and politicians start asking some key questions?  Yes, but only with dialogue and not via “witch hunts.”  With the U.S. government still distracted with unwinding of the architectonic problems that created the mess in the first place, it is unlikely that they will shutdown the best source of liquidity in a market dogged by monoline rating cuts, Attorney General actions, debenture insolvency,  and a housing market that has yet to find its bottom. 

In 1516, Niccolo Machiavelli wrote, "And one should bear in mind that there is nothing more difficult to execute, nor more dubious of success, nor more dangerous to administer than to introduce a new order to things; for he who introduces it has all those who profit from the old order as his enemies; and he has only lukewarm allies in all those who might profit from the new.”