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Americans
lose faith in Citi and Merrill
Financial
Times
23 Jan
08
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=FT&date=20080122&id=8069368
Citigroupand
Merrill Lynch's standing among US citizens has plummeted as a
result of multi-billion dollar capital injections by sovereign
wealth funds, according to new research that highlights simmering
public opposition to investments by foreign governments.
Over
half of the 1,000 people polled by the market research group
Strategy One said they "trusted Citigroup less" after
its recent decision to tap Middle Eastern and Asian sovereign
funds to ease its financial constraints.
In Merrill's
case, 45 per cent of the respondents said their trust in the bank
had fallen since hearing of investments from foreign state funds,
according to the research to be published on Tuesday.
The
negative public response to cash injections that helped
Citigroup, Merrill Lynch and other Wall Street banks to cushion
the blow of the credit squeeze underlines growing fears over the
role of sovereign wealth funds.
After initially welcoming
the capital infusions, politicians such as Senator Hillary
Clinton and Chuck Schumer, the influential New York senator, have
begun voicing concerns over the role and transparency of foreign
state-controlled entities.
Mrs Clinton, a Democratic
presidential frontrunner, told a debate in Nevada last week: "I
am very concerned about this.
"We've got to know more
about them, they've got to be more transparent.''
The new
research - carried out early this month between the two waves of
foreign investments in Citigroup and Merrill - also points to an
underlying current of protectionism within the US public, which
could be exacerbated by the rising threat of a recession.
"The
Citigroup figure is staggering," said Laurence Evans,
president of Strategy One, which is owned by the public relations
group Edelman.
"There is a xenophobic element to it.
The biggest concern is uncertainty: people don't know how much
influence sovereign wealth funds will have."
Citigroup
raised more than $20bn from investors including the Abu Dhabi
Investment Authority and the Government of Singapore Investment
Corporation.
Merrill Lynch received more than $12bn from
investors such as Singapore's Temasek and the Kuwait Investment
Authority. Both banks declined to comment.
However, they
have both stressed that the new investors have bought minority
stakes and will not get any board seats or management
role.
Nevertheless, only 4 per cent of Americans polled by
Strategy One said they trusted Citigroup or Merrill more after
the investments, with about one in four saying the sovereign
funds' presence had not changed their perception of the two
companies.
Mr Evans said Citigroup appeared to be more
closely associated with the troubles stemming from the liquidity
crunch than Merrill, probably because of its large retail banking
presence.
When asked whether they had heard of Citigroup
in relation to subprime or mortgage lending difficulties, 41 per
cent of respondent said yes, compared with 37 per cent for
Merrill.
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