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There is nothing like having cash when no one else does. The few large sovereign funds have big bags of money and have used them to pick up assets in the US and UK, especially shares in big banks and brokerages which have been hit by subprime mortgage losses. Congressmen and regulators have tried to get the funds to promise that they will not invest to get "political" leverage. So far, that has not worked well. It never does when one party in a negotiation has no leverage.

To make the point that big money from overseas will not be shackled, the head of China’s new fund say that the present global financial mess will make his job easier. "The current international market turbulence has produced unprecedented investment opportunities," said Lou Jiwei, head of the $200 billion sovereign wealth fund, established last September to earn higher returns on part of China’s vast official foreign currency reserves, writes Reuters.

That does not make him a bad person, just an opportunist in the best sense of the word.

The new fund did say that it will not seek control of the companies into which it puts money, but everyone knows full well that if the problems at financial firms continue the largest investors with the most money will also have the most influence. And, why not?

The sovereign fund phenomenon makes an odd and perverse circle. China and the Middle East make money on the US market and then invest that money back into America to buy assets which have been driven down by hard times. They risk losing their money if things get worse, but their huge capital bases put them in a good position to take some losses.

China now looks at US financial companies as a vulture looks at carrion. These firms are vile now, but in the economic cycle, that is almost certain to change.

Douglas A. McIntyre