The stock markets in Dubai plummeted today over 7%, with DP World, the port-operating arm of Dubai World, the state-run investment arm at the center of the debt crisis, slipped 15%. The UAE basically declined to stand behind Dubai World’s debts, with Abu Dhabi only committing to aid on a “case-by-case” basis. Dubai World has since offered to restructure $26 billion in debts, less than the $60 billion feared but still a significant sum. The government of Dubai is running away screaming from Dubai World, and one of their finance ministers made an interesting comment:

“Creditors need to take part of the responsibility for their decision to lend to the companies,” said Abdulrahman al-Saleh, director general of Dubai’s Department of Finance. “They think Dubai World is part of the government, which is not correct.”

You could analogize that to the situation facing banks in the US, which lent to mortgage borrowers unable to pay their loans, no? But hardly any creditor in this country has had to take any responsibility for their actions, instead being made whole by the government.

And what did they do with that bailout money? They invested in Dubai World!

December 14, 2008
Citi Arranges More Than $8 Billion for Dubai

Dubai – Citi today announced that it has recently arranged more than $8 billion of financing for Dubai public sector entities. “This is in line with our commitment to the UAE market in general, and reflects our positive outlook on Dubai in particular,” said Citi’s Chairman, Sir Win Bischoff.

“We continue to place the Gulf region among our globally most significant markets, and we certainly see opportunities across all of the UAE’s financial sectors. In the last two years, we’ve participated in most major financing transactions across the region including the UAE,” he said.

This was not long after Citibank received over $36 billion in TARP funds. All to the money-lenders who made incredible decisions like giving $8 billion to unsustainable fantasyland paradises like Dubai.

David Dayen

David Dayen