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Illustration: Sarah Grillo / Axios

Congress is working on legislation that could theoretically prevent a San Francisco-based venture capital firm from investing in a Los Angeles-based startup. It could also stop a New York-based private equity firm from acquiring an Indianapolis-based tech company.

Bottom line: None of this is intended. But that's the thing about trade wars: They can come with a whole slew of unintended consequences.

At issue is the CFIUS fix bill being pushed by Sen. John Cornyn (R-TX), with bipartisan support in both chambers and from the White House. In its current incarnation, the legislation could prevent U.S. investment funds from investing in sensitive U.S. tech companies (e.g., semiconductors, cybersecurity software, etc.), so long as those funds have any Chinese limited partners.

Investment industry trade groups are working to gain support for carve-outs, arguing that most of these limited partners are passive. And that's gaining some traction in the House, but less in the Senate (so far). Treasury just seems to want a bill done, so it's fairly agnostic.

Complications:

  1. Legislators generally dislike carve-outs.
  2. Many VC funds are currently exempt from most SEC reporting requirements, so it could be difficult for CFIUS to know identities of VC firm LPs, what percentage of the funds rhey hold or if they have control.
  3. Private equity funds do have a bit more scrutiny on them, but Dodd-Frank rollback efforts and SEC budget cuts could soon create VC fund parallels.

There is also a separate discussion about Treasury using emergency powers to restrict Chinese investments in U.S. companies, which could result in reciprocal action that would make it harder for U.S. firms to invest in China.

Go deeper

Updated 3 hours ago - Politics & Policy

Supreme Court backs religious groups on New York coronavirus restrictions

Photo: Saul Loeb/AFP via Getty Images

The U.S. Supreme Court ruled late Wednesday that restrictions previously imposed on New York places of worship by Gov. Andrew Cuomo (D) during the coronavirus pandemic violated the First Amendment.

Why it matters: The decision in a 5-4 vote heralds the first significant action by the new President Trump-appointed conservative Justice Amy Coney Barrett, who cast the deciding vote in favor of the Catholic Church and Orthodox Jewish synagogues.

USAID chief tests positive for coronavirus

An Air Force cargo jet delivers USAID supplies to Russia earlier this year. Photo: Mikhail Metzel/TASS via Getty Images

The acting administrator of the United States Agency for International Development informed senior staff Wednesday he has tested positive for coronavirus, two sources familiar with the call tell Axios.

Why it matters: John Barsa, who staffers say rarely wears a mask in their office, is the latest in a series of senior administration officials to contract the virus. His positive diagnosis comes amid broader turmoil at the agency following the election.

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COVID-19 shows a bright future for vaccines

Illustration: Annelise Capossela/Axios

Promising results from COVID-19 vaccine trials offer hope not just that the pandemic could be ended sooner than expected, but that medicine itself may have a powerful new weapon.

Why it matters: Vaccines are, in the words of one expert, "the single most life-saving innovation ever," but progress had slowed in recent years. New gene-based technology that sped the arrival of the COVID vaccine will boost the overall field, and could even extend to mass killers like cancer.