Examining the U.S. Regulatory Framework for Assessing Sovereign Investments : Written Testimony Prepared for the U.S. Senate Committee on Banking, Housing and Urban Affairs (April 24, 2008)

While recognizing that the concerns with sovereign investment in financial firms are significant, these concerns need not be answered by adding to or amending existing statutes and regulations. First, as Robert Kimmitt has noted, SWFs have not caused significant financial-market disruption, and even for investments that do involve control, there is little evidence of any ulterior foreign policy motives in practice. Second, imposing additional regulations on SWFs beyond the reasonable framework now in place may create other, more significant problems, such as a shift in SWF investment away from the U.S. The result of such a shift would be detrimental both because U.S. firms would miss the capital investments, and because the funds may flow to other jurisdictions that may be under-regulated. Arguably, this could increase the danger that SWFs would be used as political tools to harm our national interests, and make it less likely that our regulators could effectively work against such activities