Bentley
Current Krissy Event
September 20, 2011
This article is quite interesting, because at first glance, it is nothing more than a political analysis
of the potential effects of China coming into the United States. However, this article sparked my
interest because in this case, the political aspects mirror the potential economic aspects that will
result.
As discussed in class, control of a resource is a very important issue that many people seem to
wrestle with. The general consensus seems to be that giving the government too much power
leads to disorganization and underallocation of resources, which in turn skews the economy and
its physical numbers. Also discussed in class was the idea of protecting US producers and
consumers from foreign products. Now with that said, one must look again at this bank situation.
True, the bank itself is a Chinese bank, but how Chinese is it? Its in Americaits only a
branch. So technically, the bank is still an American bank. Now a Chinese business man based in
Beijing is pushing to buy it and make it a Chinese bank.
In most cases, people would look at this and say that this is no different than a company like
Red Mango coming to the US (Red Mango is a Korean-based frozen yogurt company) and
operating. However, this is a Bank- a central location of money flow. Not only is it a bank, but it
is in a prominent location- Chicago. Consider the effects on the economy. The Bank of East Asia
alone has 61.4 billion USD in assets. Will China buying it out result in that money going directly
back to Asian circulation? It is quite possible that Chinese-Americans as well as the minority
members that use this bank will start contributing to the Chinese economy rather than our own,
and that 61.4 billion in assets will quickly be cut out along with a notable source of American
influence.
Chinese Bank, ICBC, To Buy Stake In U.S. Bank
First Posted: 01/22/11 10:21 AM Updated: 01/22/11 10:21 AM
Inspiring
Greedy
Typical
Scary
Outrageous
Amazing
Innovative
Infuriating
Read More: Bank Of East Asia, Business News, China, Icbc, Industrial And Commercial Bank
Of China,Lending, Retail-Banks, Business News
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Industrial and Commercial Bank of China (1398.HK) agreed to
acquire a majority stake in the Bank of East Asia's (0023.HK) U.S. unit, making it the
first Chinese lender to buy into a U.S. retail bank, The Wall Street Journal reported on
its website on Friday.
ICBC and Bank of East Asia were mentioned in a preliminary list of companies that
were expected to participate in a contract signing ceremony at the U.S.-China Trade
and Economic Cooperation Forum.
The U.S. head of Bank of East Asia was not immediately available to comment.
The bid by China's largest lender is likely to be closely scrutinized by U.S. regulators
and could draw some political backlash, given the spotty relationship between the two
countries and the history of attempts by Chinese companies to enter the U.S. market.
But if approved it could pave the way for other Chinese banks to buy into the U.S.
market and bring fresh capital to the banking industry which recovering from the
financial crisis.
"I don't think this announcement would have been made unless they had been talking to
the Fed in advance," said Chip MacDonald, a banking lawyer at Jones Day, referring to
the U.S. Federal Reserve.
To approve a deal, the Fed will need to determine that ICBC is subject to
comprehensive supervision or regulation on a consolidated basis in its home country. In
other words, the Fed would have to recognize the adequacy of the supervision by
Chinese banking regulators -- something they have not been able to do as late as 2008.
"They said (Chinese regulators) were moving in that direction but hadn't gotten there
yet," MacDonald said. "That will open up the opportunities for other banks in China."
Bank of East Asia's U.S. subsidiary reported net income of $1.9 million in the quarter
ending Sept. 30, according to regulatory data. It had total assets of $717 million and
deposits of $425.2 million.
Hong Kong-based-Bank of East Asia formed its U.S. subsidiary in August 2001 through
the acquisition of Alhambra, California-based Grand National Bank.
The U.S. subsidiary has 13 branches in New York and California, according to its
website. (Reporting by Paritosh Bansal; Editing by Derek Caney and Matthew Lewis)