MICHEL MARTIN, HOST:
President Trump recently issued an executive order to develop a plan for a sovereign wealth fund.
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PRESIDENT DONALD TRUMP: We're going to create a lot of wealth for the fund. And I think it's about time that this country had a sovereign wealth fund.
MARTIN: But what exactly is a sovereign wealth fund, and why does Trump want one? NPR White House correspondent Asma Khalid explains.
ASMA KHALID, BYLINE: Trump first floated this idea when he was campaigning. Here he was in September, speaking at the Economic Club of New York.
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TRUMP: Why don't we have a wealth fund? Other countries have wealth funds. We have nothing. We have nothing.
KHALID: Trump points to countries like Saudi Arabia that have large sovereign wealth funds, and Brad Setser, with the Council on Foreign Relations, explains why.
BRAD SETSER: So a classic sovereign wealth fund we sort of set up to manage oil wealth.
KHALID: Countries like Saudi Arabia or Norway make a lot of money from natural resources, and they want to put that revenue somewhere. They could put it into a savings account - low risk but also low reward. So Setser, who was previously an economist in the Treasury Department, told me instead, they created these government-owned government-run funds.
SETSER: They tend to invest in equities in companies. Sometimes, that's in traded equity, like the stock market. Sometimes, that's in actually owning domestic companies. Sometimes, that's investing in companies outside your home country.
KHALID: But Setser says if Saudi is Trump's guide, there are some hiccups. How does he fund this fund?
SETSER: The big constraint is that the U.S. doesn't actually have any money to invest in a sovereign wealth fund. We don't have an oil surplus. We don't have a budget surplus. Borrowing money to buy riskier assets is, by definition, risky.
KHALID: A White House official said one option being explored is leveraging current assets. Trump has also mentioned revenue from tariffs. And Setser does point out that this idea of a sovereign wealth fund has spread far beyond just oil-rich countries. China has one. So do G7 nations like France and countries with a lot of debt like Italy also have one. But Mark Sobel says people are focused too much on the financing and not enough on how this thing would actually be governed. Sobel is a veteran of the Treasury Department. He worked there for nearly four decades.
MARK SOBEL: If we were to have one, which I don't think is a great idea, but if we were to have one, who's going to decide what the money is for?
KHALID: When Trump announced his plan the other day, he alluded to TikTok. But experts question how it would be fair to other tech companies for the U.S. to have a stake in the profits of one social media site. But for all the questions, it is worth pointing out that the broad idea of an American sovereign wealth fund is somewhat bipartisan. Last year, the Biden administration was quietly working on a similar idea. Daleep Singh was behind the effort.
DALEEP SINGH: We're in this really intense geopolitical competition that's playing out through economics.
KHALID: Sing worked on international economic issues in the Biden White House, and their thinking was that this fund could jump-start investment in critical industries that the private sector might be hesitant to invest in. But industries, they felt, nonetheless, were vital for national security.
SINGH: If all of our competitors have strategic investment vehicles, if they can stroke a check to lock up a cobalt mine in Congo, that's going to be a critical node in an EV supply chain. And if it takes us months, we're going to fall behind.
KHALID: But the idea of a sovereign wealth fund is vague enough that it's not clear Democrats and Republicans have the same intention for its use. Trump has described it as a vehicle to invest in, quote, "great national endeavors." And for Sobel, there are still a lot of questions.
SOBEL: Do I trust the Trump administration to give them a huge pot of money that they can use at their discretion? No. I wouldn't trust the Biden administration either.
KHALID: And one big question. How do you prevent the fund from becoming a political piggy bank for the president in power?
Asma Khalid, NPR News. Transcript provided by NPR, Copyright NPR.
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