Ahead of the Bell: Congress and foreign gov’t funds
By CHRISTOPHER S. RUGABER 06.05.08, 6:20 AM ET
Rep. Jim Moran, D-Va., along with other members of the task force, will speak at a Capitol Hill briefing sponsored by the National Council on U.S.-Arab Relations. Moran and Rep. Tom Davis, R-Va., visited several Middle Eastern countries last week, including the United Arab Emirates, which hosts the largest sovereign fund.
“They need to know that this is a positive climate for investment,” Moran said in an interview. Some Middle Eastern investors are concerned about a political backlash, he added, but one of the goals of the task force is to avoid “any unforeseen political reactions to their investments.”
Moran’s remarks are in contrast to concerns expressed earlier this year by several senators about the foreign government-run investment funds and their purchases of stakes in several U.S. and European banks.
Critics of the funds have said they could invest for political, rather than commercial, reasons, such as to gain access to sensitive technology. Moran said he urged government officials in the region to be more transparent about the funds’ operations, which some analysts have said could help alleviate such concerns.
Moran’s comments came as reports surfaced Wednesday that investment bank Lehman Brothers Holdings Inc. may seek additional capital from foreign investment funds due to recent losses.
Sovereign funds first leapt onto the international scene late last year, after they invested approximately $40 billion in ailing U.S. and European financial services firms, such as Citigroup Inc., Merrill Lynch & Co. Inc. and UBS.
The investments sparked several congressional hearings about the funds, which have existed for decades but have grown significantly in size and number in the past decade.
Middle Eastern funds are growing rapidly due to record-setting oil prices, while China and other Asian countries use the funds to reinvest large trade surpluses.
The funds control approximately $2.5 trillion and are forecast to increase to $12 trillion by 2015.
The House task force members visited Abu Dhabi and Dubai, which are part of the United Arab Emirates, as well as Egypt, last week. Abu Dhabi hosts the largest sovereign wealth fund in the world, the Abu Dhabi Investment Authority, which has an estimated $875 billion in assets.
Meanwhile, U.S. Treasury Secretary Henry Paulson emphasized U.S. openness to foreign investment and sovereign wealth funds during a visit to the UAE Monday.
“America will keep our markets open at home to investment from private firms and from sovereign wealth funds,” Paulson said, according to a written copy of his remarks.
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