Penthouse Retrospective

by Robert Sherrill Originally Published: June, 1980

Big Oil Big Banks | 40 Years Ago This Month

Courtenay M. Slater, chief economist of the Department of Commerce, has admitted that if foreign investors choose to hide their country of origin and their personal identity, they can get by with it easily. Paul Erdman, one of the sharper observers of foreign investments, submitted a report to Congress in which he estimated that the OPEC nations probably have as many concealed investments in this country as they have identified investments. The concealed investments, he said, are made daily “via fiduciary arrangements with foreign banks… ranging from Singapore to the Bahamas.” Why the secrecy? “For two obvious reasons… Such arrangements conceal the huge amount of OPEC, especially Arab, investment with U.S. banks and in the U. S. dollar, a matter about which the Saudis are especially touchy, and, secondly, they provide a guarantee against direct sequestership of such funds should there be an American-Arab confrontation which would lead to such a step.”

It is believed that since the United States seized Iranian funds, the remaining OPEC nations have moved increasingly to concealed investments.

Obviously, such secrecy makes it impossible for federal bookkeepers to keep track of what’s going on, and the U.S. financial structure is thereby left more vulnerable. The ignorance of our bureaucrats was revealed recently in the significant cross-examination of G. Fred Bergsten, assistant secretary of the Treasury for International Affairs, during a session of the House Committee on Government Operations.

Chairman Benjamin Rosenthal demanded an answer:

“Is there anybody in the United States government who knows how much the OPEC countries have invested in U.S. securities, in U.S. banks, or U. S. resources? Is there anybody in the U.S. government who knows that?”

Bergsten: “There would be no one who would know, Mr. Chairman…”

Rosenthal: “What is the outer limit of your best upper guesstimate including direct, indirect, hidden, or anything you want-covered, uncovered-anything, altogether?”

Bergsten: “Gee, I have not put those numbers together.”

The government’s strangely supine ignorance extends to all OPEC investments, not just its bank deposits. J. Dexter Peach of the General Accounting Office says, “The government has no record of how much portfolio investments in a U.S. sector or industry is being held by OPEC” — that is, nobody in government knows how much of our corporate stocks and bonds OPEC nations own (the lowest estimate is $10 billion worth). Nor do they have any idea how many businesses or how much real estate the Arabs own.

It is known that, in addition to hotels and cattle ranches and clothing-manufacturing plants and trucking firms and all sorts of other enterprises, the OPEC barons now own all or part of the Bank of the Commonwealth in Michigan (a bank that Rockefeller’s Chase had tried to prop up with a $20 million loan; when that failed, Rockefeller called on the Arabs for help), the Main Bank of Houston, the National Bank of Georgia, the Union Chelsea National Bank of New York, the First National Bank of Hialeah, and the Security National Bank in California-and that is an incomplete list.

“The Saudis could launch a monetary crisis by unloading their dollars and turning to gold instead.”

Sen. H. John Heinz Ill, a member of the Senate Banking Committee, warns that if all the currently proposed bank acquisitions are approved by the Federal Reserve Board, “foreign-owned bank assets will soar to more than ninety-five billion dollars — almost ten percent of the total bank assets in the United States.” Because of various techniques for hiding ownership, it would be impossible to know just how much of the control lies in the hands of the oil-producing nations. But one thing is certain: the danger comes not only from OPEC governments but also from individuals, the superrich princes living in those Arab nations. As Heinz admits, “With the tens of billions of dollars in surpluses being accumulated by OPEC states, the prospect of private citizens of those countries buying our major banks has become very real. In 1978, for example, the SEC charged four Arab businessmen with violations of securities laws for secretly attempting to acquire control of the $2.2 billion Financial General Bankshares, a Washington, D.C. — area bank holding company. It seems likely that the prospect of both direct and indirect financial and political influence will convince more wealthy Arab that American banks are promising investments.” The kind of influence they could exert is evident in the fact that in New York and in California, where the foreign bankers have moved in most heavily, they now account for nearly 30 percent of all big business loans.

Many Americans are becoming alarmed, understandably, by the invasion of foreign money. Twenty-five states now restrict foreign investment in some way. Iowa, perhaps the toughest, outlaws foreign purchase of farmland and sharply limits foreign ownership of industrial property. But the federal government shows no concern about the problem. None of the bureaucrats in Washington are trying seriously to keep track of foreign investments in commercial real estate. If you ask officials at the Department of Housing, they’ll tell you that they think foreigners have put about $4 billion in such investments, and they think that about 40 percent of the purchases have been in New York City, but they don’t know — and they seemingly don’t care. HUD officials acknowledge that foreign purchases “appear” to have added to real-estate inflation, but they say that they can’t be sure about it.

Give a few people a majority of the money. Then give them control over ALL the money. Gosh, what could possibly go wrong with that plan?

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