As major U.S. financial firms stagger under problems caused by the mortgage crisis, foreign governments, from the Middle East to China, are stepping in to invest billions in the faltering banking giants.
But these government-owned sovereign wealth funds, as they're called, are raising concerns because they aren't revealing enough about their operations or intentions, and because of fears that they will influence important American institutions.
Foreign investments in U.S. banks have drawn attention "because people see it as a somewhat sensitive sector," says Mona Sutphen, a former diplomat who is managing director of Stonebridge International, a financial consulting firm. "And it's very high profile, the amounts of money that these funds are investing."
Sutphen, the co-author of The Next American Century: How the U.S. Can Thrive as Other Powers Rise, says the investments have received attention because "the money that these funds are managing has just exploded in the last year or so, at the same time that the U.S. economy is ... declining."
The investment strategies behind the funds varies, she tells Renee Montagne.
"A lot of it depends on the strategy of the country," Sutphen says. "So if you're in the Middle East and most of your money is related to energy, you're looking to diversify out of energy. So you might be taking stakes in retail or banking or technology as a way to balance where you have your investments.
"Some countries with excess reserves are just looking for a high return, wherever that may be," she says.
Investments in U.S. banks by Middle East countries might raise eyebrows, "but for the most part, what we've seen is that these sovereign wealth funds are, in fact, long-term investors," Sutphen says. "I think the fear that you have out there is really about what might happen as opposed to what's actually happening today."
One of the biggest concerns about sovereign investment funds is that they aren't very "transparent." That means that they don't make public their investment objectives and how they are spending their money.
"A very small percentage actually do that kind of reporting, that level of transparency," Sutphen says. But for most, "we have no idea what they're spending their money on," she adds.
"I think their investment activity thus far has shown that they are interested in superior returns, they're interested in making money," she says. "I see it as a vote of confidence for the U.S. economy that they feel the long-term prospects for the United States are positive."
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