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U.S. looks closer at sovereign funds

Regulators in Washington want to take a closer look at the investments of foreign sovereign wealth funds into U.S. banks. Jill Barshay reports funds usually invest in doses which narrowly avoid the need for regulatory approval.

TEXT OF STORY

Scott Jagow: We’ve talked a lot about how money from foreign governments is pouring into Wall Street banks. These sovereign wealth funds have bought up stakes in names like Morgan Stanley and Citigroup. Those banks certainly needed the money after their indiscretions in the mortgage market. But now, regulators in Washington want to take a closer look at what’s going on here. More from Jill Barshay.


Jill Barshay: Sovereign wealth funds have invested over $44 billion in U.S. financial and banking concerns since 2006.

Karen Shaw Petrou is a managing partner at Federal Financial Analytics in Washington, D.C. She says each of these foreign investments is usually just under 10 percent of a company’s total market value. That avoids U.S. government red tape — like having to get regulatory approval or filing investment reports.

Karen Shaw Petrou: They structure them at 9.99999.

Petrou says the Treasury Department is considering lowering that threshold to 5 percent. Another proposal would require foreign governments to invest through U.S. money managers.

Petrou: It would be like putting your money in the hands of one of the big brokerage firms. You don’t have the direct control over whether or not money goes into Bank of America.

The Senate Banking committee is expected to hear from Treasury Secretary Henry Paulson this week.

I’m Jill Barshay for Marketplace.

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