This is the Cato Daily Podcast for Friday, March 14, 2008. I'm Caleb Brown. Is the concern

over sovereign wealth funds driven by issues of sovereignty or is it perhaps mere

protectionism? What is the risk of sovereign wealth funds to US security?

As the EU prepares to endorse a code of conduct for those funds, what concerns ought to dominate.

Jim Dorn, the Cato Institute's Vice on in the 1980s with the Japanese. Is that an appropriate

comparison? Well the Japanese were running the large current account surplus

with the United States bilateral surplus and they had a lot of dollars they didn't know what to do with so they started investing in US

Access in particular real estate. They brought Rockefeller Center and they bought pebble Beach and these turned out to be terrible

investments as one might imagine since they're using other people's money

rather than their own. So there's some parallel there yes the skepticism about

sovereign wealth funds is driven more by an issue of sovereignty well it's it's

driven by an issue of foreign governments possibly investing in assets in the United States that might jeopardize our national security.

I think that's the main concern.

But we already have Ciphius. I think that's the main concern.

But we already have CIFias, the Committee on Foreign Investment in the United States,

to vet these foreign investments that may have credible threats or pose credible threats to our national security.

But the problem is a lot of times it'll come under the guise of national security when in fact it's kind of a crude protectionism and we have to be careful of that particular angle because we don't want to prevent trade either in goods or investments that would benefit

the U.S. economy and benefit individuals and basically prevent those types of investments from taking place.

If I understand you correctly, you are recommending a large-scale privatization of what the Chinese government holds in its assets right now?

Well, in an ideal world, that's right. What we'd like to see is privatization of those assets

so that individual Chinese own them rather than the government.

After all, they do belong to the people.

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