Sovereign wealth funds need transparency: Schumer

By Rachelle Younglai

WASHINGTON (Reuters) - Sen. Charles Schumer on Wednesday said he welcomed foreign investment but called for more transparency among government-controlled funds riding to Wall Street's rescue by pumping billions of dollars into major banks damaged by the subprime mortgage crisis and parched credit markets.

More transparency is needed on how these sovereign wealth funds work and who makes the investment decisions for them, the New York Democrat told the Reuters Regulation Summit.

Some critics say funds created by governments in the Middle East and Asia may buy and use minority stakes in Western companies to try to push their political agendas.

But the funds have been cautiously welcomed nonetheless since big U.S. banks need capital to offset billion-dollar write-downs related to the subprime mortgage fallout.

"Compared with the choice of Citigroup (C.N: Quote, Profile, Research, Stock Buzz) laying off another 20,000 people, I'd rather have the sovereign wealth funds in there," said Schumer, chairman of Congress' Joint Economic Committee. "We can't be one of these walled-off medieval-type countries."

Citigroup said on January 15 it raised $12.5 billion from investors including former Chief Executive Sanford "Sandy" Weill, Singapore's and Kuwait's governments, and Saudi Prince Alwaleed bin Talal, the bank's largest individual shareholder.

The same day Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) said it raised $6.6 billion from a group including U.S., Japanese and Kuwaiti investors.

Charlie McCreevy, internal market commissioner for the European Union, has called the funds a welcome source of capital, although there are some legitimate concerns.  Continued...