T. Boone Pickens can get out of the alternative energy business. Under new regulations, he is allowed to buy Citigroup (C) or Bank of America (BAC). The Fed has decided that banks are so desperately starved for capital that the agency will let anyone other than a felon make an investment.

Up until now, the Fed was worried that private individuals or equity firms would have a conflict from owning significant interests in banks. There might be some self-dealing. The new owners might want to take loans from the banks. How could management turn him down?

According to The Wall Street Journal, the previous set of rules "were designed to prevent investors from abusing their bank stakes to benefit their non-financial investments."

The news is a sign of just how hard-up the Fed is. Just because banks are in trouble and need capital, there is no reason to believe that these new owners will not be inclined  to "abuse" their positions of control over large pools of bank assets.

The set of regulations put in place yesterday would let an investor own up to 33% of a bank and 15% of its voting shares before being considered a shareholder with a "controlling interest".

One of the hot topics of the last year is that regulators and Congress have tried to keep foreign sovereign funds from taking big pieces of American banks. Political interests might be part of their motivations. Kuwait or Abu Dhabi could end up in the board rooms of Wachovia (WB) or Wells Fargo (WFC). For some reason, the US government found that frightening and asked sovereign funds to sign pacts saying they would never invest in American companies for anything other than "commercial reasons."

Now banks are begging for capital. The Fed cannot come up with all that is needed and it does not want to own large pieces of financial companies, probably because it is too risky.

Suddenly, buyers who were until recently were considered too coarse or adulterated to be part of the bank ownership population are welcomed with open arms.

While it is a sort of moral relativism, the system needs the money and is willing to turn almost anywhere to get it.

Douglas A. McIntyre

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