Senate threat to US banks' foreign backers

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American law-makers are increasingly uneasy about the influence of sovereign wealth, raising fears that legislative scrutiny could choke off this lifeline to the US banking sector.

Sovereign wealth funds from Kuwait, Singapore, Abu Dhabi, South Korea and China have sunk nearly $30bn (£15bn) into America's once-feared investment banking sector, now reeling from losses due to sub-prime lending. Merrill Lynch, Citicorp, Morgan Stanley and Bear Stearns have all accepted foreign funds.

But legislators fear that foreign governments are not benign investors and are seeking to buy influence. "They may [invest] to further their foreign policy ambitions, to acquire national security assets or to purchase a stake in strategic industries," said Jim Webb, a Democratic Senator from Virginia. His fellow Democrat, Senator Charles Schumer of New York, has hinted that his influential Senate finance committee may begin hearings on the role of sovereign wealth funds later this year.