Over the years, we have grown accustomed to government bailouts of financial companies. The odd thing about the current credit crunch, however, is that it isn't the U.S. government that is doing the bailing.Our deficits are finally coming home to roost. Congress may pass laws that prevent sovereign wealth funds from voting their shares in established corporations. But all that will do is make dollars less valuable. (Which would you rather own, a unit of currency that gives you some control over what you buy or one that doesn't?) Furthermore, what about new businesses? What if a sovereign wealth fund started a completely new business in this country? How would it be controlled?
Rather, government-owned sovereign wealth funds keep popping up in the news. The flurry of activity has aroused concerns in Washington policy circles, where the hottest question has become: ``Are foreign government purchases of U.S. assets a good or a bad thing''?
The answer to that, of course, is unclear, which suggests that congressional meddling is on the way.
If congress wants to ensure that corporations operate in the public interest, it will have to legislate to that effect--independent of who the owners of the corporation are. Of course we already do that. There are mountains of regulations regarding what corporations are and are not allowed to do. So this would not be a new precedent. Of course it's also a dangerous precedent when Congress tell private organizations how to behave. But that's already an issue we must struggle with. The increasing visibility of sovereign wealth funds will give the issue more urgency.