SWF Radar USTreasury

The Financial Times reports that, “Sovereign wealth funds in the oil-rich Gulf states are actively seeking investments in the troubled US economy, Robert Kimmitt, the deputy US treasury secretary, said on Tuesday.”

The Financial Times writes, “Will the largest US banks spend or hoard the $125bn made available by a plucky sovereign wealth fund? Unlike its Asian and Middle Eastern peers, the new entrant in the game of throwing money at the battered financial sector has not cloaked its identity in a three-letter acronym, opting for the more streamlined ‘US Treasury’.”

Thomson Reuters reports that, “The United States would welcome investments from sovereign wealth funds as it grapples with the impact of the global financial crisis on its economy, Deputy U.S. Treasury Secretary Robert Kimmitt said on Tuesday.”

The WSJ Real Time Economics blog quotes Robert Kimmitt, the US deputy treasury secretary, as saying that, “In these times of heightened uncertainty, it is imperative that we don't turn inward but rather embrace free investment and trade.”

The comment comes from remarks made by Kimmitt yesterday on the recently-released GAPP guidelines for SWFs. The OIR SWF blog has extracted some highlights of those remarks.

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’.”

Paul Murphy writes at FT Alphaville that, “[I]f there is one factor that has marked this weekend as perhaps the point at which this 15 month crisis finally came to a head, it is the cold realisation by the US Treasury and Federal Reserve that they could not continue to bear losses that in a market economy should be borne by those taking the risks.”

Thomson Reuters reports that, “A senior U.S. Treasury official [David McCormick, U.S. Undersecretary of the Treasury for International Affairs] declined to comment on Tuesday on Singapore state-run Temasek Holdings’ likely expansion of its stake in U.S. investment bank Merrill Lynch & Co but said the United States welcomed foreign investment.”

RIA Novosti reports that, “At a meeting with the Russian prime minister [on Monday], Henry Paulson told Vladimir Putin that the U.S. welcomed investment, including from state sources, and would do everything to make sure the investment flows continue.”

Thomson Reuters reports that, “Russia does not yet have a sovereign wealth fund (SWF) but is working to create one, Prime Minister Vladimir Putin told U.S. Treasury Secretary Henry Paulson on Monday.”

The article quotes Putin as telling Paulson that, “Since we do not have a sovereign wealth fund yet, you are confusing us with someone else. But we are ready to [create a SWF], especially if you want us to.”

Russia’s National Wealth Fund (also known as the National Welfare Fund or National Prosperity Fund), which was formed by splitting the Stabilization Fund in two (with the greater part of the assets being assigned to the Reserve Fund, the other fund formed in the split), is generally considered to be Russia’s SWF.

Taking the second part of the Putin quote at face value, it could make sense for the United States to ask that state foreign investments be channeled through SWFs that identify themselves as such. This would make such investments easier to track and regulate and would certainly facilitate and add significance to the work of the IMF’s International Working Group.

But the US Treasury’s recent agreement with its Chinese counterpart to clear the way for indirect foreign investment by China’s SWFs via the country’s state-owned enterprises disconfirms that such transparent channeling is being explicitly sought.

The International Financial Law Review reports that, “In a letter to the US treasury, the Chinese Securities Regulatory Commission has criticised proposals affecting the Committee on Foreign Investment in the US. The US reaction could lead to protectionist stalemate.”