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Washington, D.C., February 27th – Congressman Jim Moran, Virginia Democrat, today unveiled the creation of a new bipartisan task force to explore sovereign wealth funds (SWF). Teaming with Rep. Tom Davis (R-VA), the bipartisan task force will study issues surrounding SWFs including their potential to affect geopolitics, and the U.S. and international economy.
“With $2.2 trillion in currency reserves, sovereign wealth funds are poised to become the defining player in international finance,” said Moran. “In the next decade, they are projected to grow to over $13.4 trillion, more than the value of the NY Stock Exchange. This bipartisan task force will explore issues surrounding sovereign wealth funds with an eye towards determining the need for legislative action.”
Sovereign Wealth Funds (SWFs) are state-controlled investment vehicles typically funded through revenues from oil and natural gas profits. In the past, these funds invested mainly in U.S. Treasury bills given their low-risk and steady returns. But as the dollar continues to decline, SWFs are increasingly turning away from these investments towards both the purchase of equity stakes in U.S. companies and other foreign currencies. Because the U.S. economy is dependant on the purchase of our U.S. Treasury bills to pay for our deficit spending (China currently holds in excess of $1.5 trillion in U.S. debt), a shift away from U.S. investment by SWFs could have major implications for our economy.
Seven SWFs currently have over $100 billion in assets, including those based in Abu Dhabi, Singapore, Norway, Kuwait, China, and Russia. Many SWFs lack transparency making it difficult to determine how much money is involved, whose money it is and how these massive funds are being used. Significant concerns are being raised due to the recent purchase of equity stakes in some of the biggest American companies. These include Dubai’s purchase of a $7.5 billion stake in Citicorp, Saudi Arabia’s $6 billion purchase of a stake in HSBC Holdings, and China’s slice of The Blackstone Group.
Moran went on to state, “The non-partisan Congressional Research Service tells us that if SWF countries were to rebalance their portfolios all at once – moving from dollars to some other currency -- they would sell off $526 billion in dollars. That’s a massive flow, enough to destabilize our economy. With the U.S. boasting some of the most dynamic growth opportunities in the world, it is important that we understand and be on the leading edge of this profound financial, global transformation. And given growing leverage these funds have over our economy, it is imperative we being focusing on this issue immediately in a bipartisan fashion.”
The Chairmen of the Ways and Means and Financial Services Committees have each designated one member to serve on the new Task Force on Sovereign Wealth Funds. The task force will hold its first meeting Thursday, February 28th to discuss issues of SWF transparency and accountability.
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