Merrill Lynch is seeking about $4bn in a second capital raising, as the hole in the US investment bank’s balance sheet continues to grow.
The Kuwait Investment Authority is expected to be a significant investor in the new deal, which could be announced as soon as midweek, according to people familiar with the matter. Other investors could come from Europe.
KIA, which may also invest as much as $2bn or $3bn in Citigroup, is emerging as an large source of rescue finance on Wall Street. Once among the most conservative of sovereign wealth funds, KIA is changing its strategy in order to move more quickly than competitors and seize opportunities amid the turmoil in the US credit markets, these people say. Both Merrill and KIA declined to comment.
It isn't necessarily problematic to have foreign governments invest in our major financial institutions, but people who know more than I do should at least be thinking about all of the potential ramifications. Banks aren't simply widget makers; they have a rather special role in the economy.