LaborTalk for December 28, 2011

U.S. Investors Are Buying Troubled European Firms;
Will Shift in Strategy Affect the American Economy?

By Harry Kelber

As Europe struggles with its debt crisis highlighted by several countries in dire financial straits, America's big-time Wall Street investors are seizing the opportunity to buy the assets of their banks and businesses.

The sales are being promoted because European banks are scrambling to raise capital and shrink their balance sheets, often under the orders of international regulating agencies.

European financial institutions are expected to unload up to $3 trillion in assets in the next 18 months, according to Huw van Steenis, an analyst with Morgan Stanley.

All kinds of financial global deals are taking place, often through private negotiations. involving, for example, a luxury hotel in Miami Beach to the tallest office building in Ireland.

This month a team of bankers from the London office of the buyout giant Kohlberg, Kravis Robert examined a private Greek company that cannot get Greek banks to provide credit for future growth. Also, The Blackstone Group agreed to buy from the German financial giant, Commerzbank, $300 million in real estate loans that are backed by properties, including the Mondrian South Beach Hotel in Florida.

Commerzbank is under pressure from regulators to raise 5.3 billion euros ($6.9 billion) in new capital by mid-2012. Where is it looking for new capital, if not from the United States and China?

Besides Greece and Ireland, the Kohlberg Kravis bankers are also looking for deals in Spain and Portugal, where rival companies are having a similarly hard time winning new credits or extending existing loans.

Last month, Wells Fargo bought the $3.3 billion in real estate loans, which are backed by commercial properties in the United States that had been owned by the former Anglo-Irish Bank. Wells had also bought 2.4 billion in loans and other assets from the private Bank of Ireland, which is trying to raise 10 billion euros ($13 billion) after a bailout by the European Union and the International Monetary Fund.

Will Exodus of U. S. Capital to Europe Hurt the American Economy?

The global economy is undergoing complex changes, in which the international banking system and multinational corporations play a more dominant role than governments.

Wall Street investors are looking with greedy eyes at the new openings to make profitable acquisitions at the expense of European restructuring and shrinking of its institutions.

But what will a massive export of U.S. capital do to the American economy, its unions and its workers? The AFL-CIO and Change to Win have given little attention to the shifts in economic power around the world, focusing on domestic problems. It is sad that our top labor leaders know hardly anything about the world of international finance or keeping its members informed about global developments.

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It is urgent that American labor leaders establish a close working relationship with their counterparts in the European Union and with countries in serious financial difficulties that are being compelled to sell off their assets..

Labor must be vigilant so that workers' jobs and their rights are not traded off in these secret deals.

LaborTalk will be posted here on January 2, 2012 and on our two web sites www.laboreducator.org and on www.laborsvoiceforchange.org.

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