Resilience Package dwarfed by bank investments

Singapore’s Resilience Package is a bold, welcome measure to stimulate the economy. But I couldn’t resist noting the day it was announced:

But the 20.5 billion Singapore dollar ($13.7 billion) Resilience Package falls billions short of Singapore’s total investments in the troubled banking giants, Citigroup and UBS.

Bloomberg now reports: Singapore’s state-owned funds invested about $24 billion in UBS, Citigroup and Merrill Lynch in the past 14 months.

In other words, Singapore invested more in the three foreign banks than it has in protecting jobs and businesses at home!

The Resilience Package adds up to just about 57 percent of the total investments in UBS, Citigroup and Merrill Lynch.

We know Singpore bought stakes in the banks as long-term investments.

But they have hardly been goldmines.

Temasek Holdings bought shares in Merrill Lynch when it was considered too risky by Bank of America. The New York Times reported in October last year, a month after Bank of America acquired Merrill Lynch:

Bank of America had considered purchasing Merrill some 10 months ago but found its mortgage exposure too unpredictable.

Temasek and GIC don’t have to explain their decisions – they are not publicly traded.

GIC reports to its board of directors, which includes Prime Minister Lee Hsien Loong and Minister Mentor Lee Kuan Yew.

Temasek’s CEO is the Prime Minster’s wife, Madam Ho Ching, who has been praised by Time and the International Herald Tribune and was the eighth most powerful woman in the business world according to Forbes last year.

Both the funds have been consistently profitable, so they must be in good hands.

One may feel curious about how GIC operates since it manages Singapore’s foreign reserves.

But it insists on secrecy to avoid tipping off its competitors.

So while laws have to be debated in parliament and the President’s permission needed to dip into Singapore’s reserves – which the government used for the first time this year to fund the Resilience Package – Singapore’s foreign reserves are managed in secrecy. GIC doesn’t disclose the size of its portfolio or even name all the companies it has invested in.