Earlier this week, the Treasury Department issued a proposal underlining rules for investments of sovereign wealth funds in America. The new rules, under the Foreign Investment and National Security Act of 2007 and the Committee on Foreign Investment in the United States, treat the funds as any other foreign government-controlled or influenced investments have been treated for decades.

So, why is there so much fuss over these proposed Treasury rules? The answer is a poignant reminder of how far and how fast American economic power has retreated recently. Finsa was signed into law only last July, but the world today, and foreign investments in America, is far different than it was then.

In July, America was a country that viewed foreign capital more as a potential national security threat than as an economic life preserver. Back then, substantial infusions of foreign capital into major American financial institutions were the exception rather than the norm. What a difference nine months makes.

The list of American private equity funds with substantial investments from sovereign wealth funds is now vast and includes such giants as Apollo, Blackstone, and Carlyle. Sovereign wealth fund investments in hedge funds include those in J.C. Flowers & Co. and Och-Ziff Capital. Investment banks with sovereign wealth fund holdings include Merrill Lynch, UBS, and Morgan Stanley. Commercial banks with sovereign wealth fund investments include Citigroup. Nasdaq itself has a substantial sovereign wealth fund interest. A Chinese sovereign wealth fund might have made a major investment in Bear Stearns, but the Cfius process delayed the transaction until after the investment bank’s demise.

This list includes only investments in financial institutions. Twelve months from now, no one doubts that the list of sovereign wealth fund investments will be much larger. Sovereign wealth funds in Abu Dhabi, Singapore, China, and other countries have trillions of dollars to invest, and these funds are growing much more rapidly than the American economy. The funds will necessarily be invested somewhere, much of it here.

Why the explosion in sovereign wealth fund investments in American financial institutions over the past nine months? An unsustainably profligate fiscal policy and easy monetary policy, combined with a weak economy, have left the dollar diminished relative to other major international currencies. This weakened dollar makes investments in America increasingly attractive abroad.

In addition, commodity prices denominated in any currency have continued to increase. Last July, oil traded at what then seemed inflated prices of $70 a barrel. Today, oil prices are topping $120 a barrel. We Americans spend vast sums on oil and other products and services from abroad. Those dollars often accrue in the sovereign wealth funds of foreign governments.

What will become of the proposed Treasury rules? The rules will likely be adopted, not so much because they represent a radical departure from prior Cfius practice, but precisely because they do not.

Although government officials publicly call for greater transparency of sovereign wealth funds, realistic observers recognize that transparency is an elusive goal. There is no commonly accepted definition of a sovereign wealth fund, much less any plausible enforcement mechanism for American rules to be imposed on the funds abroad.

Indeed, transparency is not an end unto itself. Greater transparency will not make an investment by an Iranian sovereign wealth fund in an American defense contractor, for example, worthy of approval. Lesser transparency will not make an investment by a Canadian fund in an American supermarket chain unpalatable. Greater transparency may merely add billions of dollars to the cost of sovereign wealth funds doing business in America without changing any review decisions by our federal government.

We want America to be the most friendly environment for investors — both domestic and foreign. That means no costly filing of useless paperwork, an unfortunate outcome of many regulatory efforts such as those aimed at increasing “transparency.” But it also means that our government can occasionally block those investments it views as sensitive to national security or those made by investors hostile to America. That is how Cfius has worked for the past 20 years.

The problem America faces is not that our processes to review foreign investments are broken. Instead, our challenge is that America is economically a much weaker country today than we were a year ago. Developing rules that punish law-abiding investors will not help America but will discourage reasonable investors from restoring our economic well-being.