Schumer questions Dubai’s 19.9% stake in NASDAQ

Sen. Charles Schumer (D-N.Y.) raised questions on Thursday about the Dubai government’s deal to take over part of the NASDAQ stock market, harking back to last year’s bipartisan outcry over a Dubai firm’s bid to buy U.S. ports.

{mosads}Both NASDAQ and the government-controlled company Bourse Dubai have volunteered to screen the deal through the Committee for Foreign Investment in the U.S., or CFIUS. Congress revamped that screening process this year after Dubai Ports World set off a political firestorm in 2006 with an ill-fated takeover deal that did not receive a full round of scrutiny from the Bush administration.

“It’s different when a foreign government takes over an important part of the U.S. economy,” said Schumer, No. 3 in the Democratic Caucus and a senior Banking Committee member. “Governments have political considerations.”

Schumer wrote to Treasury Secretary Hank Paulson on Thursday urging the department to vet the deal using guidelines from this year’s CFIUS reform bill, which does not technically take effect until Oct. 24. Sen. Chris Dodd (D-Conn.), the Banking panel’s chairman, said he would reserve judgment on any potential security risk to the deal until the CFIUS review was completed.

“As a general matter I support foreign direct investment in our economy that promotes growth and creates good jobs for our citizens but always in the context of ensuring that our nation’s security is protected,” Dodd said in a statement.

The Dubai ports deal proved politically effective for Democrats, driving a wedge between Republicans, many of whom bemoaned that the Middle Eastern company was not fully reviewed, and the Bush administration. The stock exchange purchase raised a far softer alarm on Thursday, to which several Democrats credited their successful reform of CFIUS.

Borse Dubai would acquire a 19.9 percent stake in NASDAQ and buy NASDAQ’s entire stake — 28 percent — in the London Stock Exchange.

“The new CFIUS law has strengthened our nation’s foreign investment vetting process to prevent another Dubai Ports debacle,” Rep. Carolyn Maloney (D-N.Y.), a senior author of the reform bill, said.

Despite the Oct. 24 start date for new CFIUS rules, Treasury spokeswoman Brookly McLaughlin said, “We are making every effort in the meantime to run the process in a manner that’s consistent with the intent of the new law.”

Provisions of the CFIUS reform bill, signed into law by President Bush in July, largely codify practices that Treasury already has instituted, one administration official said. For instance, the official added, the Bush administration for several months now has notified Congress of deals under CFIUS review.

Meanwhile, Republicans on the Banking panel were unfazed by Democratic wariness of the deal.

“Dubai is making a purchase on the open market of an asset that’s for sale. What’s wrong with that?” Sen. Bob Bennett (R-Utah) said.

Jessica Holzer contributed to this report.