How A Legendary Salomon Brothers Bond Trader Negotiated A Secret Deal With Saudi Arabia To Save The U.S. Economy

Bloomberg’s Andrea Wong recently reported on an unlikely and incredibly tie between the United States and Saudi Arabia. According to Wong, legendary Salomon Brothers bond trader William Simon brokered a secret $100 billion deal between the United States and Saudi Arabia back in 1974 that may have saved the U.S. economy and has linked the fates of the two nations together to this day.

Officially, newly-appointed Treasury Secretary Simon was simply taking a diplomacy tour of Europe and the Middle East back in 1974, but the entire trip was arranged with one mission in mind: Strike a deal with Saudi Arabia to help keep the ailing U.S. economy afloat.

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The framework of the deal was fairly simple: Saudi Arabia would get the United States’ oil business, as well as military aid and equipment. In turn, the United States would get Saudi Arabian oil and an understanding that the kingdom would pour a large amount of its oil revenue back into the United States by buying U.S. Treasury bonds.

A Secret Well Kept

If you’re wondering why Saudi Arabia’s massive $117 billion investment in U.S. Treasuries hasn’t made headlines until now, it has to do with the terms of the deal that Simon negotiated. Saudi King Faisal bin Addulaziz Al Saud wanted the kingdom’s investment in America to remain an international secret. And so it did until Bloomberg gained access to the information via a Freedom-of-Information-Act request earlier this month.

Now that the cat is finally out of the bag, some analysts are concerned that the collapse in oil prices could drive Saudi Arabia to begin liquidating its massive position in U.S. Treasuries.

In the past year, Saudi Arabia burned through $111 billion in reserves and is now even selling a stake in its state oil company, Saudi Aramco.