Beijing Bails Out Wall Street?

The financial wires were hopping this morning with more bad news. Wall Street was in trouble again. Morgan Stanley, one of the largest investment banks in the world, admitted to $9.4 billion in losses. The problems relate back to the unending subprime saga. The markets can’t seem to shake it, we’ll probably be dealing with it well into 2008, possibly 2009 or 2010.

All of this is old news.

Here’s the rub of the story. The company bearing the name of one of America’s most famous financier’s (John Pierpont Morgan) left the confines of Lower Manhattan with hat in hand to Beijing. China Investment Corporation, a Chinese state-run company, bought a $5 billion stake in one of J.P. Morgan’s namesake. What would have been unthinkable 15 years ago, is almost becoming commonplace.

U.S. economic weakness is now apparent in two ways. Not only are many American homeowners in danger of becoming renters again, American investment banks are in danger of working for foreign countries. Do regulators turn a blind-eye to this sort of thing? Or did this happen because the Saudis said “no”? Something tells me it’s a little of both.

I’m not sure Nixon and Kissinger had this in mind when they opened up diplomatic relations with Chairman Mao. Ah, but times have changed since the 1970’s. Times have changed.