- The Washington Times - Friday, September 21, 2007

Borse Dubai, brimming with petrodollars from oil and gas sales, yesterday announced plans to buy nearly a 20 percent stake in the Nasdaq Stock Market and a 28 percent stake in the London Stock Exchange, prompting calls for a review by lawmakers who torpedoed a purchase of port facilities by a Dubai company last year.

Part of an intricate partnership venture between Borse Dubai and Nasdaq, the deal is aimed at creating what would become the largest network of electronic exchanges worldwide. As part of the deal, approved unanimously by Nasdaq”s board, Borse Dubai also would buy a stake in the Nordic Stock Exchange (OMX), which it would transfer to Nasdaq, while providing Nasdaq with a cash infusion by purchasing its shares in the London exchange.

“These strategic actions will provide us with a footprint unlike any other exchange, creating a global exchange leader,” said Bob Greifeld, president of Nasdaq, saying the deal should be in place by early next year if it wins approval from regulators in the U.S. and Europe. The cash infusion from the Dubai exchange would enable Nasdaq to pay down $1 billion of debt and start a stock buyback program to boost its share prices.

The plan raised apprehension on Capitol Hill, where memories are still fresh about the public backlash against a bid by Dubai Ports World last year to acquire major U.S. port facilities.

Sen. Charles E. Schumer, New York Democrat and a main leader against the ports deal, said the stock-exchange deal gives him “pause” and urged the Bush administration to investigate the matter.

“I believe that the acquisition of such a large stake in a U.S. exchange by a foreign government raises some serious questions,” the senator wrote in a letter to Treasury Secretary Henry M. Paulson Jr.

While the Dubai exchange would become Nasdaq’s largest stockholder, the deal would cap its voting share at 5 percent, with the rest held by an independent trustee.

Mr. Schumer said he supports foreign investment in the United States, “but we must be careful of the kinds of investments made in our critical financial infrastructure, such as financial exchanges.”

He noted that Dubai has been cited as a nexus for terrorist financing and money laundering and as a “potential crossroads” for shipping and trading linked to Iran”s drive to obtain nuclear materials and technology.

Senate Banking, Housing and Urban Affairs Committee Chairman Christopher J. Dodd, Connecticut Democrat, also called for a “careful review” of the deal.

“As a general matter, I support foreign direct investment in our economy … but always in the context of ensuring that our nation”s security is protected,” he said.

Not all lawmakers were concerned.

“It”s a different issue from the port,” House Speaker Nancy Pelosi told reporters. “That was a security issue. This is a marketplace issue.”

Mr. Schumer said the deal should be subject to tightened restrictions on foreign ownership of critical assets under a law approved by Congress earlier this year. Although the restrictions aren’t scheduled to go into effect until later this year, the deal would be one of the first big tests of the new law, which is carried out by a committee on foreign investment at the Treasury Department.

President Bush said yesterday that the deal will receive close scrutiny.

“We’re going to take a good look at it, as to whether or not it has any national security implications involved in the transaction,” he said at a press conference.

Treasury is dependent on foreign investors to buy U.S. bonds and otherwise finance the huge $800 billion U.S. account deficit. The review comes at a critical time amid tentative signs that foreigners are shying away from U.S. debt markets because of the debacle in subprime mortgage securities.

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