Senator Webb Calls For Close Scrutiny Of Foreign Government Investment In U.S. Assets

November 14, 2007 -- Washington, DC – During a hearing of the Senate Committee on Banking, Housing and Urban Affairs, Senator Jim Webb today urged the Unites States government to explore the economic and national security implications of direct foreign government investment in the United States economy.

The hearing follows up on a letter sent by Senators Webb, Dodd, Shelby, and Bayh in September to the Treasury Department, urging the development of regulations that ensure proper assessments of the national security implications of such investments.

“Sovereign wealth funds represent a totally new national security concern,” said Webb. “We are not talking about foreign investment. We’re talking about foreign government investment. Governments make investment decisions differently than private investors. It is important to ensure that our laws and policies are responsive to the opportunities and threats posed by government investment.”

“Some transactions may provide foreign governments with control over U.S. acquisitions involved in sensitive national security matters,” continued Webb. “In addition, sovereign wealth funds pose potential risks to our financial markets through the kinds of leverage they can use against the very health of our economy. In those situations, economic decisions can merge with political considerations, with significant strategic implications.”

“Further, the lack of transparency regarding the operation of some of these funds, such as those of China and Russia, demands closer scrutiny. Congress needs to ensure that the Committee for Foreign Investment in the United States, the body tasked with reviewing the national security implications of foreign investment in the United States, adequately examines these investments,” said Webb.

While foreign governments have traditionally invested in the United States through low-risk investments like U.S. treasury bills, sovereign wealth funds have grown rapidly in size and number and are aggressively pursuing other U.S. assets. These funds have risen to recent prominence on a wave of increased foreign exchange reserves in oil-rich and Asian countries benefiting from increased commodity prices and export-led growth. According to the International Monetary Fund, sovereign wealth funds currently manage around $3 trillion and are expected to grow to over $12 trillion by 2012.

Source: Senator Jim Webb