Lou Dobbs is very annoying.

Having got this off my chest, I can go on to say why the CNN cable news host, who takes to the air most nights in the US to complain about illegal immigration and free trade has riled me.

As detailed admirably by Andrew Ross Sorkin in the New York Times, Mr Dobbs’ latest populist crusade against foreign ownership of US assets concerns CSX, the US railway company that has been attacked by The Children’s Investment Fund, the London-based hedge fund.

Mr Dobbs described it the other night on CNN as “a new threat to national security and sovereignty” because investors in this “shadowy foreign investment fund” may include sovereign wealth funds. You can see the video here.

“To heck with them, dismiss them, who the heck to they think they are?” he said of TCI when discussing its refusal to detail the investors in its fund, beyond the fact that SWFs comprise less than 1 per cent.

His beef with TCI and allied hedge funds trying to exert management pressure on CSX seems to be that no foreign investment group should control a US railway company. CSX, among other things, transports some military equipment.

Neither the Securities and Exchange Commission nor the government is inclined to interfere on the proper grounds that CSX is a public company and TCI is within its rights as a shareholder to launch a proxy fight.

Mr Dobbs and several senators with financial links to CSX now want the matter perused by the Committee on Foreign Investment in the US, which has oversight of contentious foreign takeovers.

As Ross Sorkin points out, there is a reasonable argument to be had over whether TCI is right to attack CSX, but that is beside the point.

Having railed successfully against DP Ports World extending its influence to US ports in its 2006 takeover of P&O, Mr Dobbs is now broadening his definition of untrustworthy foreigners from Arabs to the British.

I can think of various objections to this but here are a few:

First, if you are going to define any investment fund in which a sovereign wealth fund has invested as a “foreign government” entity, you have to include several Wall Street investment banks and private equity firms.

Second, why are all kinds of transportation now being described as national assets? The US, along with some other countries, has restrictions on foreign ownership of airlines and Mr Dobbs seems to want to add railways.

What exactly does he fear? That a Gulf fund with a tiny passive stake in TCI will manage to divert a CSX train in the middle of the US with weapons on board? It does not seem very plausible.

Third, Mr Dobbs objects to Henry Paulson, the US Treasury Secretary, trying to reassure foreign investors that the US is happy about them putting capital into banks and other companies. But should the US really reject foreign investment when it is sorely needed?

June 11, 2008 5:04pm in Finance | Comment