Lehman Brothers Holdings (NYSE: LEH) has approached a Korean sovereign wealth fund (SWF) about investing. But Lehman probably won't get the money it seeks. Reuters reports that Korean Investment Corp (KIC), an SWF that manages about $20 billion and is an investor in Merrill Lynch (NYSE: MER), is unlikely to invest in Lehman.

Meanwhile, Bloomberg reports that investors on the Einhorn side of Lehman -- those hoping its stock will drop -- are increasing their wager. It notes that options traders increased their bearish positions to a two-month high yesterday. With one analyst expecting Lehman to report a second-quarter loss of 50 cents a share during the week of June 16, put option volume rose to 283,676 contracts, or quadruple the 20-day average, and bearish bets on the company exceeded bullish ones by 1.6-to-1.

As I mentioned during my talk at Stanford in April, SWFs have been burned by their investments in the U.S. finance industry. One of them, the Citic Group, was lucky it was able to bail out of its commitment to invest $1 billion in Bear Stearns. But that close call is likely to keep other SWFs from throwing good money after bad.

Until recently, it appeared that Bear Stearns (NYSE: BSC) had one investor still happy with putting money into the investment bank. That would be China's CITIC Securities. The capital would have given the firm a relationship with a large U.S. financial company. It has some real strategic value.

Over the weekend, CITIC sent a message that was the equivalent of saying "goodbye and good luck" According to Reuters, CITIC stated, "We cannot guarantee reaching a final agreement in the future."

While the news should not surprise anyone, it may just be the tip of the iceberg for U.S. banks and brokerages. Overseas financial institutions have been willing to put money into U.S. firms to get joint ventures in place. Sovereign funds have sent out checks to troubled Wall Street operations because they feel that when the U.S. economy turns, the equity they have purchased will rise in value.

The debacle at Bear Stearns may change much of that. The perception of the risk of putting money into U.S. financial companies may have doubled.

That leaves the Fed as the only check book left.

Chinese investors feel that they got burned when they took a stake in big private equity firm Blackstone (NYSE: BX). That IPO did not do well, so the disappointment is understandable.

But the Chinese may be back. According to a report in the FT, the China Social Security fund, which manages over $62 billion in assets, has its eyes on KKR, Carlyle, and TPG. The fund is interested in a stake of 9.9% in at least one of the companies. The British newspaper quoted one analyst on the potential investment: "'China's interest in buying into overseas financial intermediaries is clearly part of a deliberate strategy,' said Isaac Meng, an analyst with BNP Paribas in Beijing. 'The government is hoping to do a better job in exporting its capital than the Japanese did in the 1980s.'"

That may all be well and good, but members of the US Congress are already concerned about the investment of China's Citic Securities in Bear Stearns (NYSE: BSC). It is unclear how such an investment would compromise US interests, but Congress could try to block these deals on the grounds that large investment and LBO firms control a huge portion of the investment capital in the US. They would not want any Chinese influence in the process.

The Congressional posturing on the matter is a red herring, but meddling by the federal government could simply make the Chinese wary of moving capital into the US. If Congress leaves the matter alone, Wall Street firms are likely to have Chinese shareholders.

Douglas A. McIntyre is an editor at 247wallst.com.

Bear Stearns Companies Inc. (NYSE: BSC) is getting a $1 billion investment from Chinese investment bank Citic. The only catch is that Bear Stearns has to invest $1 billion in the Chinese company. Citic can buy as much as 9.9% of Bear Stearns if it wants to.

Why swap money? That's a good question. Bear Stearns' stock is flat today, trading around $116.50, not far from its low and a great distance from its 52-week high of almost $173.

The Wall Street Journal says that "the investment highlights China's increasing financial prowess on the global stage, and the eagerness with which Western firms are hoping to penetrate the insular Chinese financial sector." But there is no reason to believe that trading investment dollars will do anything to achieve that.

Citic is a big underwriter of Chinese IPOs. How that helps Bear Stearns is bit of a mystery. If Citic wanted make a big push into the US market, it should have cut a deal with a first-tier firm like Morgan Stanley (NYSE: MS).

The lackluster reaction of Bear Stearns' stock price today shows the market does not think much of the deal. It shows that investors have sense. There is no there there.

Douglas A. McIntyre is an editor of 247wallst.com.