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Out Of Mind » THE INSANITY OF REALITY » GLOBAL FINANCIAL COLLAPSE » U.S. Senator Questions Fed on Chinese Bank Decision

U.S. Senator Questions Fed on Chinese Bank Decision

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godsfool713

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http://www.businessweek.com/news/2012-05-11/u-dot-s-dot-senator-questions-fed-on-chinese-bank-decision

U.S. Senator Questions Fed on Chinese Bank Decision
By Jim Rubin on May 11, 2012 Tweet Facebook LinkedIn Google Plus 3 Comments

A Federal Reserve decision to let Chinese banks acquire U.S. lenders was challenged by Senator Bob Casey, who said it could open the way for Chinese government-run institutions to undercut U.S. banks.

“I worry that these banks and their U.S. subsidiaries will use their state support as a way to underprice U.S. banks,” Casey, a Pennsylvania Democrat and chairman of the Joint Economic Committee, said in a letter yesterday to Fed Chairman Ben S. Bernanke.

Industrial & Commercial Bank of China Ltd. won approval from the Fed on May 9 to buy a U.S. lender in the biggest opening of the American banking market to Chinese companies. The Fed allowed ICBC to operate as a bank holding company, buying a controlling stake in Bank of East Asia Ltd. (23)’s U.S. unit. The Fed also let Bank of China Ltd. and Agricultural Bank of China Ltd. (601288) open U.S. branches.

The decision marks the first time that regulators have allowed a Chinese bank to buy a majority stake in a U.S. depository institution. ICBC Chairman Jiang Jianqing has spent more than $6 billion on acquisitions in regions spanning Asia to South Africa and the Americas over the past three years, seeking to triple the share of profit coming from abroad to 10 percent.

“China has a long and well-documented record of undercutting U.S. companies and workers,” Casey said in a statement. Its “history of flouting international trade rules requires that any involvement in the U.S. banking system needs close scrutiny.”

In his letter, Casey said he intends to press Bernanke to explain the Fed’s decision when he testifies before Congress’s Joint Economic Committee on June 7.

Toehold for Growth
The $140 million acquisition of 80 percent in Bank of East Asia’s U.S. arm gives Beijing-based ICBC 10 branches in California and three in New York, a toehold for U.S. growth. The initial agreement in January 2011 was among as many as 60 signed by Chinese and U.S. firms during President Hu Jintao’s visit for talks with President Barack Obama.

China Construction Bank Corp. (939), the nation’s second largest, is in talks to buy the South American assets of WestLB AG, the Wall Street Journal reported, citing a person it didn’t identify. The bank seeks the assets to pursue commercial banking in the continent in a deal that may be valued between $200 million and $300 million and wrapped up by June, the newspaper said.

ICBC was the largest bank in China at the end of 2011, with $2.5 trillion in assets, and is about 71 percent-owned by the government, according to the Fed’s order. Bank of East Asia, based in Hong Kong, is run by the family of Chairman David Li.

Bank of China, the third-largest Chinese bank by assets, received approval to open a federal branch in Chicago, while Agricultural Bank, the fourth largest, obtained approval to open a state-licensed branch in New York, according to the Fed.

To contact the reporter on this story: Jim Rubin in Washington at jimrubin@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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