Evan Bayh, the Indiana Democrat and chairman of the Senate’s Banking Subcommittee on Security and International Trade and Finance, this week urged Congress to enact formal rules on sovereign wealth funds.Sovereign funds — money pools controlled by foreign governments — have made billions of investments in U.S. banks and corporations in recent months.
Now bigger than hedge funds, 28 countries now control more than $2.8 trillion. Investment banks estimate that figure could reach $12 trillion —- nearly the size of the entire U.S. economy — in eight years.
Writing in The Wall Street Journal, Bayh argued that while foreign investment is important to America, the lack of regulation is a huge risk that the country cannot continue to run.
Bayh pointed out that the idea of our own government buying up bank stocks would be shocking, even called "socialism,” yet we seem less concerned about foreign governments, some of them nominally communist, owning large chunks of major Wall Street banks.
"As Americans, we realize the folly of allowing our government to own our private companies, yet paradoxically, some appear far less alarmed by the prospect of another country's government doing the same,” Bayh wrote.
Bayh wrote that foreign investment has been a key driver of economic developing since the first British colony at Jamestown, in 1606, before the country’s founding.
The forefathers understood the importance of welcoming outside financial support.
"It would be folly to prohibit these investments. Allowing funds to be reinvested in America mitigates the consequences of transferring so much wealth abroad for energy and consumption,” Bayh wrote.
"It also strengthens our economy, creates jobs, improves productivity and keeps interest rates low,” the senator wrote.
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