WRAPUP 1-US Treasury officials wary of excessive regulation
ju4 wa4i dia4n zo1ng he2 ba4o da4o :\n  By Steven C. Johnson and Burton Frierson\nNEW YORK, June 11 (Reuters) - U.S. Treasury officials on\nWednesday said the United States should not resort to\nheavy-handed regulation of financial markets or foreign\ninvestment by state-run enterprises and funds.\nRobert Steel, the Treasury's undersecretary for domestic\nfinance, said at a Wall Street Journal Dealmakers Conference\nthat recent moves to expand central bank lending to investment\nbanks has brought "a new level of regulatory" engagement with\nWall Street firms.\nBut he stressed that avoiding future credit problems will\nrequire better regulation rather than simply more regulation.\n"The idea that just piling on more regulation is the\nantidote isn't right," he said, adding "there's an irony here\nthat the most heavily-regulated institutions are probably the\nhomes of the largest amount of problems."\nHe said the breakdown in U.S. mortgage lending standards\nplayed a large role in sparking the global credit crunch of the\npast year, adding that subprime loans did a lot of good for\nborrowers with less than stellar credit.\nSteel also criticized credit rating agencies, saying they\n"clearly got it wrong" when they provided top ratings for\nstructured financial products such as collateralized debt\nobligations, many of which have tanked in value due to the\nhousing slump.\nAll financial market participants, including regulators,\nratings agencies and investors, must raise their standards to\navoid more credit problems in future, he said.\nSteel conceded that problems in financial markets were\nhaving an impact on the U.S. economy but added that progress\nwas being made in sorting out lingering credit issues.\nSteel also said the takeover of investment bank Bear\nStearns by JPMorgan Chase <JPM.N>, engineered in part by\nofficials at the Federal Reserve and U.S. Treasury Department,\nwas not about one institution but about the state of markets.\nLIGHT TOUCH FOR SOVEREIGN WEALTH FUNDS Regulators should also employ a light touch when it comes\nto vetting investment by state-run wealth funds, even though\ntheir activities do raise some concerns, Assistant Treasury\nSecretary Clay Lowery said on Wednesday.\nSpeaking at the same conference, Lowery said sovereign\nwealth funds from the Middle East and Singapore have been\nresponsible investors, while newer funds from China, Russia and\nSouth Korea could learn best practices from these and others.\nWhile Treasury will continue to review investments on a\ncase by case basis, he added that "we in the United States\nshould not be looking for transactions to block."\nSome lawmakers and economists fear that sovereign wealth\nfunds, thought to control some $3 trillion in assets, lack\ntransparency and may compromise national security by buying\ninto strategic firms or sectors.\nThe U.S. Treasury heads the inter-agency Committee on\nForeign Investment or CFIUS, which is charged with reviewing\nall foreign acquisitions.\nA recent proposal to subject foreign investment in\nsensitive U.S. assets to security reviews, even if they were\nfor stakes smaller than 10 percent, has drawn sharp criticism\nfrom authorities in China, Britain and elsewhere.\nLowery said the low U.S. savings rate -- he called it the\ncountry's weakest economic fundamental -- means the U.S. is in\nno position to refuse foreign investment, which creates jobs\nand wealth.\n"If anything, we should be looking at figuring out ways to\nget investment to continue to flow, because that's really\nwhat's in our national security interest," he said, adding\n"part of our national security is having a healthy economy, and\nthat includes attracting investment."\nDavid Marchick, managing director of government and\nregulatory affairs at buyout firm Carlyle, said at the same\nconference that most foreign investments carry no security\nimplications, while those that do are reviewed accordingly.\n"We have a process in place that's very strong and has a\ngood track record," he said.\nSovereign wealth funds from China, Abu Dhabi, Dubai,\nKuwait, Singapore and elsewhere have invested in giant U.S.\nfinancial firms such as Citigroup <C.N>, Morgan Stanley <MS.N>\nand Blackstone Group <BX.N> in recent years.\n(Reporting by Steven C. Johnson and Burton Frierson;\nEditing by )\n((steven.c.johnson@reuters.com; 1 646 223 6346; Reuters\nMessaging: steven.c.johnson.reuters.com@reuters.net))\nKeywords: USA ECONOMY/REGULATION