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The Treasury and some members of Congress are concerned that sovereign funds from the Middle East and Asia may use their investments in US banks and corporations to push their global political goals. Treasury Undersecretary for International Affairs David McCormick said the government-controlled funds may raise "legitimate national security concerns," and may distort markets if not managed properly, according to MarketWatch.
If the large funds walk away from investing in the US, especially when banks and brokerages may need more money to weather the credit crisis, finding large pools of capital may be difficult.
But, one sovereign fund, Singapore state investor Temasek, appears to be willing to agree to make official its intention to put money into US companies for only "financial" reasons. According to Reuters, "A Temasek Holdings executive told a U.S. House of Representatives subcommittee that it supports the aim of U.S. lawmakers to maintain the right balance between national security and investment flows."
But, Singapore is not the problem. It does not have a vast economy like China which could make use of US technology and financial expertise. It is not a huge producer of oil like the Gulf States who may want to try to influence the way US business sees OPEC's bias toward high oil prices. The political interests of Asia and the Middle East may indeed conflict with those of the US government.
The Treasury still has to walk a fine line. Some sovereign funds may not be willing to agree to any restrictions at all. That means capital for large, troubled US companies may have to come from the federal government itself. But, who says that is bad?
Douglas A. McIntyre is an editor at 247wallst.com.
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