The New York Times reports that Merrill Lynch and several other big financial firms are seeking foreign investment to offset their losses brought on by their heavy betting on the subprime mortgage market, a development that may be troubling some in Congress:

To shore up its deteriorating finances, Merrill is now in discussions with investors in the United States, Asia and the Middle East, including American private equity firms, to raise about $4 billion in the coming days, these people said.

The developments underscore the rising toll that the mortgage crisis is taking on many once-proud Wall Street banks. In recent months Merrill and several other firms have grabbed financial lifelines from wealthy foreign governments. Further investments by so-called sovereign wealth funds could prompt scrutiny by Congress.

…

Merrill is hardly alone in seeking capital from overseas. United States financial institutions have raised more than $29 billion from foreign governments and their related investment entities, according to the market research firm Dealogic.

In recent months, the Government of Singapore Investment Corporation, Singapore’s lesser-known government fund, invested $9.7 billion in UBS; Citigroup sold a $7.5 billion stake to the Abu Dhabi Investment Authority; and the China Investment Corporation poured $5 billion into Morgan Stanley.

If a foreign government takes another big stake in Merrill, Congress might ratchet up its scrutiny of sovereign wealth funds, which have ballooned thanks to rising oil prices and booming emerging markets.

On Thursday, SenatorCharles E. Schumer, Democrat of New York, expressed concern about the amount of money American financial institutions are contemplating raising from sovereign wealth funds.

Foreign investment, in general, strengthens our economy and creates jobs,” Senator Schumer said. Because sovereign wealth funds, by definition, are potentially susceptible to noneconomic interests, the closer they come to exercising control and influence, the greater concerns we have.”

Probably worth noting the investments that Merrill Lynch has made in some U.S. politicians — Schumer’s number two on their list (Merrill Lynch is his sixth most generous patron), followed by a good chunk of the 2008 presidential field — Sen. Hillary Clinton ($208,735), Sen. John McCain ($195,000), Sen. Christopher Dodd ($192,350), former New York mayor Rudy Giuliani ($168,950) and former Massachusetts governor Mitt Romney ($148,600).

The politicians who have enjoyed Citigroup’s largesse can be found here (Clinton tops with list with $642,060 in contributions) while those who have enjoyed Morgan Stanley’s favor are here (President George W. Bush, the top beneficiary of Merrill Lynch contributions, also tops Morgan Stanley’s list, with $748,530).

Thanks to the Center for Responsive Politics for the data.