An American Sovereign Wealth Fund?

President Trump’s flurry of executive orders are signaling an agenda of reform and reinvention reminiscent of FDR’s 100 days in 1933 and Reagan’s bold strokes in 1981. Some of Mr. Trump’s new ideas, though, raise novel constitutional questions. Feature the new sovereign wealth fund that the president decreed today with a stroke of his Sharpie. “We have tremendous potential,” Mr. Trump says of the fund. No word yet of any okay by Congress.That could prove a roadblock, Axios reports, calling approval by Congress “a tough prospect, given the fund would potentially be a way to cut lawmakers out of a key funding stream.” Considering the complexity of such an enterprise — such a fund would be a federal vehicle for making investments, potentially taking on ownership stakes in a range of assets and enterprises, oversight from Congress would be advisable and, conceivably, required.As of Monday afternoon, the text of Mr. Trump’s executive order hasn’t been made public, but Bloomberg News has reported that an existing federal agency, the International Development Finance Corporation, could be repurposed as an American sovereign wealth fund. That agency, formed in 2018, “stands to get as much as $120 billion in capital of its own,” Bloomberg reports, and could “trigger far larger geopolitically driven overseas commitments.”The “size and scale of the U.S. government and the business it does with companies,” said the Commerce secretary-designate, Howard Lutnick, “should create value for American citizens.” He hypothesized today that, say, “if we are going to buy 2 billion Covid vaccines,” then “maybe we should have some warrants and some equity in these companies and have that grow for the help of the American people.” Yet the idea of Uncle Sam demanding such concessions gives us, at least, pause.More clarity on the nature of the new sovereign wealth fund could go toward providing reassurance on this head. The world already has some 179 sovereign wealth funds, the Financial Times reports; they manage more than $12 trillion in assets. Most of these entities are designated as “strategic funds,” which are assigned a particular goal, like, say, Saudi Arabia’s, which is meant to support the Saudi Vision 2030 development project.Britain’s sovereign wealth fund, which was, incidentally, created via legislative action, is another strategic fund. Yet that variety of sovereign wealth fund is “the most susceptible to cronyism,” the FT’s Toby Nangle has said, and “international experience is littered with high-profile disasters.” He points to the scandal involving the Malaysian sovereign wealth fund 1MDB, which the Justice Department in 2016 called its “largest kleptocracy case to date.” The 1MDB case even led to the incarceration of Malaysia’s former premier. Mr. Nangle also notes that the Panama Papers disclosed how Angola’s strategic sovereign wealth fund, known as Fsdea, paid millions of dollars “to close contacts of President José Eduardo dos Santos’s son.” One can only imagine the potential temptations that could arise for public officials with access to the billions that would fill the coffers of an American sovereign wealth fund.“We are going to monetize the asset side of the U.S. balance sheet for the American people,” Secretary Bessent crowed today, without elaborating. Mr. Trump pointed to the new sovereign wealth fund as the vehicle by which TikTok, with its ties to Communist China, could be liberated from its owners, provided Uncle Sam gets a cut of the action. It’s not unlike how the mandarins at Beijing demand to partner with foreign firms doing business on the mainland.“We’re going to be doing something perhaps with TikTok, and perhaps not,” Mr. Trump mused this afternoon, after having previously mooted the idea of America taking a stake in the firm. Meanwhile, he’s held off on enforcing the law Congress passed calling for TikTok to be sold or close down. In other words, nice company you have there, would be a shame if anything happened to it. Such are the joys of the proprietor of a sovereign wealth fund. ___________Correction: Comments made today by the Commerce secretary-designate, Howard Lutnick, were misattributed in the bulldog.

An American Sovereign Wealth Fund?

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