Daniel K. Tarullo's Testimony Before the House Committee on Financial Services

April 27, 2006

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This hearing takes place, of course, against the backdrop of the recent controversy over the proposed acquisition by Dubai Ports World of the British-owned Peninsula and Oriental Steam Navigation Company, including its wholly-owned U.S. subsidiary, which operates two dozen terminals at various U.S. ports. In the wake of this episode and certain other recent proposed acquisitions of U.S. companies by foreign purchasers, it has become clear that there is a widespread lack of confidence within the Congress in the Administration’s discharge of its responsibilities under Section 721 of the Defense Production Act of 1950, as amended, popularly known as the Exon-Florio Amendment. The central question before us is what the Congress should do as a result of its dissatisfaction, given the co-existence of important national security and economic impacts from administration of this law.

In the balance of my testimony, I will first describe the background of Section 721 and identify with more specificity the key developments that provide the context within which this important policy question arises. Then I will suggest the principles that ought to inform our approach to national security screening of foreign investment in the United States. Finally, I will turn to an assessment of the basic tools for change that are available to the Congress and the areas in which change would be helpful.

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