SWFs Seek Acceptance in U.S.

His proposed remedy: a code of conduct. "I'm baffled by why SWFs don't get together and put an end to all this discussion by agreeing on some piece of paper that says, We're under no circumstances going to speculate in currencies; we're always going to be a long-term investor; we're never going to use our SWF to pursue any political objective."

The SWF managers protested, as one, that since they had never engaged in any of the activities that Summers expressed concern about, there was no reason to try to regulate them so. "You're talking about how to pre-emptively regulate something that may happen," said Muhammad Al Jasser of Saudi Arabia. "We've had a lot of resistance to regulating the hedge funds, and the rating agencies, even though there were failures galore. So let's be a little bit more balanced." Touché! Kristin Halvorson of Norway responded that while Norway would appreciate having some common rules, the hypothetical examples Summers cited "would never be possible in Norway."

Summers responded with an anecdote about how the Norwegian fund had sold short the shares of Icelandic banks, and the potential political complications those actions raised. Touché right back! (At which point I turned to the private-equity executive sitting behind me and said, "He's so sharp they should make him the president of Harvard." The response from the Harvard grad: "This is why he didn't make it as president of Harvard.")

Later, however, in discussing the rising concern in the United States about SWFs buying American assets, Halvorson had the last word: "It seems you don't like us, but you need our money."

© 2008