Lots of buzz lately about sovereign wealth funds—those huge investment pools run by foreign governments that are becoming an increasingly important source of capital for U.S. companies.

The Wall Street Journal’s Michael Phillips reports that foreign investors bought nearly $1 trillion in U.S. securities in 2007. And a small but growing share was acquired by sovereign wealth funds operated by dozens of countries, including China and the oil-soaked nations of the Middle East.

Ted Truman of the Peterson Institute for International Economics estimates that roughly $2.7 trillion in international assets are owned by non-pension sovereign wealth funds, while a new report by the Joint Committee on Taxation predicts “significant growth” in their positions over the next five or 10 years.

Most economists see foreign investment as a good thing. But it makes many politicians and much of the public very nervous. For instance, after the March, 2006 dustup over whether Dubai Ports should operate some U.S. shipping facilities, the Pew Research Center for People and the Press found that 53% of those surveyed opposed foreign investors acquiring U.S. companies. More than one-third thought overseas companies should not even invest in the U.S.

With the U.S. economy sagging and sovereign wealth fund investments growing, we may be seeing the beginnings of a similar backlash against foreign governments buying U.S. companies. Paradoxically, with U.S. markets tottering, it is coming just as we most need overseas capital. For instance, the Kuwait Investment Authority may have limited the damage from Wall Street’s credit panic by pumping cash into Citigroup and Merrill Lynch.

Still, I wouldn’t be surprised if we don’t start hearing more about the tax treatment of these investments. As Vic Fleischer explains in a recent blog, foreign governments are exempt from U.S. tax on their investment income. The JCT report describes this in lots of detail. That tax treatment may be the next target of opportunity for the same economic populists who oppose free trade.

No doubt, sovereign wealth funds raise red flags. Most are notoriously opaque. There are issues about whether they should be allowed to vote their shares in private companies. And, because these funds are government-run, their investment strategy could become a tool of their nation’s foreign policy. For instance, China could threaten to pull hundreds of billions out of our markets if the U.S. recognized Taiwan. Of course, the more U.S. assets foreign governments own, the less they’d play politics with their investments, since such a step would cost them real money.

In reality, as long as we continue to run huge deficits, we will need new sources of capital to help finance economic growth. We can avoid this by saving more, but as long as we won’t, we better hope that foreign investors continue to see the U.S. as an attractive market. After all, as one Hill aide told me this morning, “It is our money. Why wouldn’t we want them to invest it here?”