October 14, 2008 Tuesday

US 'will bounce back and we'll survive'

Tony Tan's long-term perspective wins applause from bankers

By Bhagyashree Garekar, US Correspondent

WASHINGTON: Dour-faced bankers dissecting the pock-marked global financial landscape broke into smiles and cheers when Government of Singapore Investment Corporation (GIC) executive director Tony Tan told them the US would eventually bounce back and 'we will survive'.

The conversation at the annual meeting of the Institute for International Finance here had been full of doom and gloom, and on Sunday morning, in Washington's recently renovated and gentrified Chinatown, the mood was as tense as the pre-opening moments of the New York Stock Exchange.

It was a similar story at the nearby White House, Treasury, International Monetary Fund Headquarters and the World Bank, all of them awash with grey faces as the weekend rolled on.

So there was an expectant hush as Dr Tan answered a question on when sovereign wealth funds (SWFs), the custodians of over a trillion dollars, might reinvest in banks.

Dr Tan said the SWFs, which are government investment bodies, were absorbing the implications of different countries' government intervention in banks.

'The problem arises that if the states are going to invest in banks, then what happens to the shareholders? When you do not know what will happen to your investments, in the likelihood of a state intervention at some stage, then the sensible thing is to do nothing until the state has made its investment,' he said, as his co-panellists Lord Adair Turner, the chairman of Britain's Financial Services Authority, and Mr William Winters, the co-chief executive of JP Morgan Chase Investment Bank, nodded.

But being by definition long-term investors, he said, the SWFs were less concerned about the daily swings of the Dow and would give the managements of the companies they invested in time to put in sensible plans which would stand them in good stead once the turmoil abated.

And it will abate, he reminded the audience in the closing moments of the two-hour session of brainstorming about the future shape of global finance.

'In these difficult times, I think one has to have a sense of perspective,' he said.

'All of us are going through difficult times now...But this is not the end of the world. This is not the end of the US as an investment market, we believe. The US will remain, in spite of everything, a resilient and well diversified economy. And any international investor, including the GIC, must still invest in the US.'

He added: 'The problems will be overcome at some stage, the only thing we do not know is at which stage and how much damage will be done to the economies, institutions, consumers and householders before these issues are resolved.

'If governments and policymakers make the right decision, then the damage can be limited. If the wrong decisions are taken, then the markets will resolve the difficulties, the damage will be considerably higher but the problems will be resolved.

'The markets will still go on, the economies will manage, and we will all survive.'

With that, he fell silent and the audience burst into applause.

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