Chidambaram, the Hedge Fund Manager

Home minister Chidambaram claims to have suggested that SBI should have bought Citibank in 2008 when its shares were going at $1. Wonder why he has decided to dedicate his life to harassing tax payers and Naxalites, when we could have easily run billion-dollar hedge funds with his superb sense of timing.

According to the finest minds in finance, you cannot time the market. Of course, there are exceptions.  George Soros is one. He can ride up when a bubble is blowing and flip over when the bubble bursts. However, the market-timers are a rare breed, and run their own billion-dollar hedge funds. To this rare breed, one should now add Palaniappan Chidambaram, legal eagle, former finance minister and currently home minister of India. Speaking at a momentous occasion like the 54th Foundation Day of the All-India Management Association in New Delhi, he claimed to have told OP Bhatt, chairman of State Bank of India, in late 2008, “Why don’t you buy Citibank?” Apparently, he had made this suggestion thrice. “Citibank’s shares were going at $1 a share. That is the time when we should have bought,” he announced.

This is news to us and shows an unknown side of the home minister. In late 2008, when the largest of funds were struggling for survival; when the smartest of brains were worried that the world was headed for a second Great Depression; when the most liquid and deepest markets in the world were frozen and paralysed, the then finance minister was asking the SBI chairman, not once but thrice, to buy Citibank. This is a remarkable transition for someone who once famously said: “I know Khan market. I don’t know anything about the stock market.”

Well, you can say hindsight is 20/20 (how right he was!), or you can admire the prudence of State Bank or you can wonder why Chidambaram has decided to dedicate his life to harassing tax payers and Naxalites, when he could have easily run billion-dollar hedge funds with his superb sense of timing. But beyond that, several issues arise from Chidambaram’s statement. India does not have a liberal banking regime. Foreigners cannot easily buy into Indian banks (ask Hong Kong and Shanghai Banking Corporation about its “strategic” stake in Axis. It had to sell the stake after a period of frustration). Well, for that matter, even Indians cannot easily buy into Indian banks. There are severe restrictions on ownership and voting rights. And here is the former FM suggesting that an Indian bank should buy Citibank when it was seen to be drowning in a sea of toxic assets! Indeed, can State Bank simply buy a major foreign bank even under normal circumstances? Would the prudent Reserve Bank of India have allowed it? By the way, under Chidambaram’s tenure as the FM, there were hardly any financial sector reforms. His regime will be better remembered for maddeningly complicated taxes and massive loan waivers.

Chidambaram’s suggestion to Bhatt was bold. But boldness in financial business is not necessarily prudent. After all, as the old Wall Street saying goes: “There are bold traders. There are old traders. But there are no bold, old traders.”  But who can tell that to a Home Minister?

1 decade ago
Pointed, pithy, pulchritudinous.

Simply Superb!

C ki le li !!
1 decade ago
I don't know about it being an old Wall Street saying: I have seen it referenced to war and soldiers (" old, bold soldiers").

Since he hasn't ever had to personally face the smoke of violent battle, yet has made himself the de facto CinC of a civilian army marching to wreak destruction across India, this is a major lesson he has yet to learn.

But who can tell a Home Minister that the bold soldiers who will die young are all someone else's children?
Shibaji Dash
1 decade ago
If you have not mastered the 'Mantra' to paralyze a scorpion, then do not dare put your hand to grab the snake from its pit - so goes an old Sanskrit simple saying. Perhaps Mr Bhatt was aware of this prudential norm of the ' Shastras'.
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