Sovereign Wealth Funds Spark Government Action
The US, France and Germany are reported to be acting separately to address the political threats of sovereign wealth funds both within their respective borders and across the globe.
Sovereign wealth funds are pools of foreign capital acquired and invested by governments.
They are a relatively new occurrence and there are few mechanisms in place for regulating how they invest.
China, Russia, Venezuela and Kazakhstan (among others) hold such funds.
The funds' assets are enormous.
They are currently estimated to control $1.5 to $2.5 trillion dollars.
Morgan Stanley has estimated that this number will balloon to $12 trillion by 2015.
Concern in the US and Europe
US, French and German lawmakers have all expressed concern that the funds will position themselves to take over companies in strategic sectors of western economies.
The fact that the funds are controlled by governments means that their goals will not merely be business-oriented, but motivated largely by geopolitical interest.
The US will call for tight IMF regulations on the funds at the G7 conference in Washington, DC later this week.
France is reported to be working on legislation that would give the French government power to protect French industrial giants from take over.
The German chancellery has two large groups working on legislation would require increased transparency and give the government power to block deals after a review.
Sources also say that Japan will come out as an ardent supporter of the US proposal at the G7.
