Sovereign Wealth Funds

SOVEREIGN WEALTH FUNDS -- (House of Representatives - January 29, 2008)

The SPEAKER pro tempore. Under a previous order of the House, the gentlewoman from Ohio (Ms. Kaptur) is recognized for 5 minutes.

Ms. KAPTUR. Mr. Speaker, the recent shocks to the global economy and U.S. financial institutions have revealed a major new source of investment in the U.S. economy called Sovereign Wealth Funds. These funds are the surplus savings of our trading competitors from foreign countries and have been key in bailing out major U.S. corporations like CitiGroup, Merrill Lynch, Blackstone, and so many others that have made terrible decisions and played with the people's money to abandon. Three billion dollars was invested by the Chinese, for example, just in the Blackstone Group.

Put into perspective, the Chinese Government, and I underline ``government,'' is projected to have more than $3 trillion by 2010 that can be used to buy our stocks, bonds, real estate, and entire corporations. They're just getting started. Put into context, the Government of China will soon have enough investment monies to buy 51 percent; that is absolute control of more than 40 percent of all the U.S.-based corporations whose stock is listed on the New York Stock Exchange. Think about that. The Government of China literally could buy half of all the stock listed on the New York Stock Exchange. And that's only China.

Many people in this Nation and in this Congress would strongly oppose having the United States Government buy control of two out of every five companies listed there. It would be called socialism. But how will we react if the Chinese Government buys those same companies, which is, my friends, underway?

Already we see China, Kuwait, Norway, and other nations buying major stakes in our banks and in investment houses, institutions that exert enormous political and economic influence in our Nation and world. Can we trust that those investments are purely for economic returns?

Secretary of the Treasury Paulson has repeatedly stated that this administration has no interest in knowing the details of such investments by sovereign wealth funds. The present panic in our banks and financial institutions to secure capital to offset their mortgage and credit card debacles may induce the heads of those corporations to take bailouts on virtually any terms. But we must be wiser. A head-in-the-sand ostrich policy by the United States Government is simply not acceptable. Indeed, it is reckless, and it threatens national security.

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At a minimum, Congress and the American people need to know the details of those transactions. Thus, foreign governments investing in U.S. companies through these funds should be required to make public their activities here, just as we require of public companies in the United States. Sunshine, as always, is good public policy. And if disclosure turns away investment, then the obvious question is what was the real goal of those funds.

Simultaneously, Congress needs to seriously consider whether limits should be placed on foreign investments in critical U.S. industries. Germany, Japan, Korea, and China all do. They understand that foreign economic control brings with it foreign political involvement in internal affairs.

In sum, sovereign wealth funds are a large and growing influence in the global economy and inside the United States. They have the potential to buy absolute control of a significant portion of the United States' economy, and that is under way. For the present, we need full disclosure about their U.S. holdings and intentions.

Simultaneously, we need to quickly and seriously think about what limits and controls the American people, through their government, should place on such investments.

Strangely, last week, President Bush signed an executive order transferring his power to the Treasury Department to authorize or reject such foreign takeovers of American companies. But officials from the Department of Defense, Department of Justice, and Department of Homeland Security objected to the order over the past few months saying it served business interests over national security interests. It allows Wall Street to gain an edge at the expense of national security. This Congress should not allow that. Economic and national security should go hand in hand. We cannot allow lax regulation of foreign involvement in our economy, and we cannot allow our indebtedness to foreign interests to continue to mount.

I would like to place two articles in the Record tonight, one from the Washington Times on January 24, entitled, ``Treasury Gets New CFIUS Authority.''

This is the entity at Treasury that reviews these deals. And it talks about how CFIUS is reviewing a proposed merger between the telecommunications equipment manufacturer 3Com and China's Huawei Technology Corporation, a company linked in the past to illegal international activities including violations of U.N. sanctions on Iraq and industrial espionage against the United States and Japanese firms. The Boston-based Bain Capital Partners would undermine U.S. national security, and this is one of the groups that's handling this.

Interestingly, Treasury Secretary Henry Paulson recused himself from this particular review because his former company, Goldman Sachs, is a paid advisor to 3Com.

And also I wish to place in the Record and will end, Mr. Speaker, with a January 25 Wall Street Journal article, ``Lobbyists Smoothed the Way for a Spate of Foreign Deals,'' which goes into heavy analysis of the $37 billion of stakes in Wall Street financial institutions, the bedrock of our financial system, by selling these growing sovereign wealth funds.

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