Why won't hedge funds bet their $2 trillion to boost Wall Street capital?

• Oil money is so abundant that its owners don't worry as much about returns. Middle Eastern investors have benefited from the rising price of oil -- it's up four-fold since early 2001 -- so they are swimming in cash. They see how much money Prince Alwaleed made on Citigroup and they think they can get in on the same now. Moreover, they are willing to take a minority stake and be passive because they figure that if they lose their entire investment it won't matter. And the influence they get over U.S. foreign policy might be significant.
• The U.S. government wants to avoid a direct Wall Street bailout for ideological reasons. Although the current administration seems fine with tax cuts -- which help the top 1% -- government help is not allowed to extend to Wall Street banks. That's because the administration fears an outcry by consumers who took on the subprime loans that Wall Street profited from packaging. It wouldn't look good if the administration had to bail out those subprime borrowers and Wall Street.

I think it's a big problem that the administration is selling big chunks of the U.S. banking system to countries whose strategic interests are at odds with ours. And the fact that the $2 trillion hedge fund industry is not willing to put a fraction of its capital in Wall Street's biggest banks may tell us something about how bad their balance sheets really are.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citigroup and has no financial interest in Merrill Lynch securities.