WALL STREET’S most powerful chief executives weighed into the row over protectionist trade policy in America, claiming that proposed reforms to the rules governing foreign investment in the US could scare away billions of dollars worth of business.

John Mack, Morgan Stanley’s chief; Stan O’Neal, his Merrill Lynch counterpart; Charles Prince of Citigroup and Jamie Dimon of JP Morgan Chase all signed a letter sent this week to the US Senate Banking Committee to express deep concern over proposed changes to the law governing the Committee on Foreign Investment in the United States (CFIUS).

Richard Shelby, chairman of the Senate Banking Committee, wants to beef up CFIUS, a panel that scrutinises proposed acquisitions of US assets by foreign companies or governments to determine whether the deals would jeopardise national security.

The proposed reforms are designed to allay political and public fears that foreign powers or terrorist organisations could gain access to sensitive US defence technology or important infrastructure through mergers and acquisitions.

The proposed new rules would shunt almost all proposed takeovers and mergers in America by a foreign company or government into a review process that could last as long as 120 days.

The Wall Street titans believe such changes to the law will turn foreign investors away from the US because of fears that American companies will have an unfair advantage as they will face less regulation in takeovers and mergers.

The chiefs said that they were “very troubled by proposals that would discourage foreign investment by requiring lengthy review periods, or proposals that, while intended to elevate national security scrutiny of foreign investments, might well prompt decision-makers to disapprove meritorious investments that do not pose genuine national security threats.”

Calls for reform of the CFIUS laws reached fever pitch this year when Dubai Ports World, a company controlled by the Government of Dubai, acquired Britain’s P&O and with it several key port facilities in the US. After an unprecedented public outcry in America, DPW was allowed to proceed with the P&O deal only after it agreed to hive off the US assets into a separately controlled entity.

The Wall Street worries are part of a widening opposition to the proposed CFIUS reforms that is led in Washington by a contingent of British diplomats. Britain is the biggest foreign investor in the United States and there are fears that the lucrative relationship between the two countries could be damaged by the CFIUS changes.

But the investment banking chiefs are also concerned that any increase in protectionist trade policy in the US will have a seriously damaging effect on Wall Street’s advisory businesses. “If there are fewer foreign deals there are fewer fees from advising on them,” a Wall Street source said. “Simple as that.”

The draft proposals on CFIUS were drawn up last week by Senator Shelby and are to be read on the Senate floor today.

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