SWF Radar USA

The Times writes that, “How could any sensible investment fund in the Gulf or east Asia want to be bound solely to dollar-denominated instruments, especially when America's politicians and bankers don't seem capable of running a whelk stall? Of course a Gulf sovereign fund wouldn't sell all its dollars overnight, for it would ruin itself in the process. But it is more than likely being advised, right now, to steadily shift more of its savings.”

Douglas Rediker and Heidi Crebo-Rediker of the Global Strategic Finance Initiative at the New America Foundation write at The New Republic that, “[T]he U.S. has done little to attract [SWFs]–and in many cases, has pushed them away. With changing global dynamics encouraging SWFs to take their checkbooks elsewhere, the U.S. needs to act quickly and aggressively to attract its fair share of this much-needed capital.”

The Associated Press writes that SWFs could find a way to profit from the Unites States’ $700bn bailout fund.

The New Yorker’s Think Tank blog discusses the conclusions of Brad Setser’s paper Sovereign Wealth and Sovereign Power (PDF), published last month by the Council on Foreign Relations Press.

Financial Week reports that, “Sovereign wealth funds have invested a good chunk of their assets in U.S. companies, spending more than $43 billion from January 2007 through June 2008. But many of those investments are not disclosed and indeed are only loosely tracked by U.S. agencies, according to a study published today by the Government Accountability Office.”

The WSJ’s Real Time Economics blog writes that, “The dollar could bear a big part of the adjustment to the growth of sovereign wealth funds, as global capital flows diversify out of U.S. government securities, the International Monetary Fund said Thursday.”

The Wall Street Journal writes that, “This is a bittersweet moment in U.S. economic history. In one sense, the growing importance of foreign cash represents the triumph of a half-century of U.S. proselytizing for a global financial system in which money flows from those who have it to those who need it. But it is also an unmistakable sign of U.S. economic decline. The global financial system the U.S. designed had anticipated that American banks and financial firms would be the world’s financial lifeguards; now those institutions are like exhausted swimmers a stroke or two away from drowning.”

Harold James, professor of history and international affairs at Princeton University and professor of history at the European University Institute writes in the Taipei Times that, “China is the US of this century. The initial stages of the credit crunch last year were managed so apparently painlessly because sovereign wealth funds (SWF) from the Middle East, but above all from China, were willing to step in and recapitalize the debt of US and European institutions. The pivotal moment in today's events came when the Chinese SWF China Investment Co (CIC) was unwilling to go further in its exploration of buying Lehman Brothers. CIC's turning back will be held up in the future as a moment when history could have turned in a different direction.”

The Telegraph writes that, “The US Treasury is not taking on permanent debt: it is behaving like a giant wealth fund, hoovering up mortgage securities selling far below their real value for reasons of panic. Famed investor Warren Buffett expects it to make ‘a considerable amount of money’.”

The Oxford International Review’s SWF blog has published an interview with Professor Victor Fleischer of the University of Illinois College of Law.

Among other things, he says that, “I think, at a minimum, Congress should repeal section 892 and treat SWFs like private investors. Under current law, the tax code subsidizes state-controlled investment to the detriment of private investors. Allowing private investors to compete on a level playing field would dampen any potential clientele effect.”