Capital Markets

Under Secretary of State, Keith Krach warns of Market Indexes and Chinese Accountability

Keith Krach: American stock index funds such as MSCI, have been including Chinese stocks in their emerging market indexes for quite some time. Now, these index makers know of this lack of independent audits and inconsistent financial principles and attempt to minimize their risk by noting a waiver of liability language which clearly describes this lack of complete accounting. The Federal Thrift Savings Plan, which manages the retirement funds of federal employees and military members, came under intense scrutiny from Congress and on both sides of the aisle. When it moved to invest in these MSCI indexes. 401Ks of all 10 of the largest publicly traded U.S. companies, all 10 of the top federal contractors, and 20 of the largest state pension plans. As well as all six largest mutual fund providers invest in China. At present, this preferential treatment afforded Chinese companies caused an unlevel playing field for capital transactions with an extreme bias against U.S. companies.