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NEW YORK (CNNMoney.com) -- Federal regulators stressed the importance of leaving the United States open to investments by sovereign wealth funds Wednesday, but warned of the need to push for better transparency among these growing state-sponsored entities.

Testifying before two subcommittees of the House Financial Services Committee, representatives from the Treasury Department, Securities and Exchange Commission and Federal Reserve said that these funds not only foster domestic economic growth but have provided stability to financial markets and U.S. companies.

"If we were to prohibit sovereign wealth funds from investing in our market for fear they might introduce market distortions, there is a risk we might actually end up doing precisely this to ourselves," said Ethiopis Tafara, director of the office of international affairs for the Securities and Exchange Commission.

Congress is examining these controversial investments after foreign funds pumped more than $40 billion into Wall Street firms in recent months. Some world leaders, as well as the American public, are concerned that these funds may try to wield these investments as a diplomatic tool. The worries are fueled by the funds' lack of transparency about their operations.

A majority of American voters think these foreign infusions harm both the national security and the economy of the United States, according to a recent survey by Public Strategies Inc.

Lawmakers generally spoke highly of the funds' operations in the U.S. during Wednesday's hearing, but they acknowledged the need to examine them more closely.

"We must ensure they play by the same rules that all large investors play by, and must assure that sovereign wealth funds do not pursue purely nationalistic [goals] at the expense of the companies in which they invest," said Rep. Spencer Bachus, R-Al.

Some groups like the International Monetary Fund have encouraged these funds to develop a voluntary set of "best practices", which would include disclosing, among other things, their investment positions, ownership stakes, and size of their resources.

Sovereign wealth funds, which act as a country's investment arm, have long invested money gained through exports or from the sale of commodities such as oil. But they have ramped up their infusions into a range of American companies, including Motorola (MOT, Fortune 500) and Home Depot (HD, Fortune 500), purchasing stakes worth a total of $414 billion in 2007, up 90% from the year before, according to Rep. Luis Gutierrez, D-Ill., chair of the Subcommittee on Domestic and International Monetary Policy.

The credit crisis, which has left several financial firms strapped for cash, opened up even more opportunities for these funds. A number of Wall Street firms have looked to sovereign wealth funds to raise capital.

So far, Citigroup (C, Fortune 500) has raised $22 billion from state funds located in Abu Dhabi, Kuwait and Singapore. Others have enacted similar moves including Merrill Lynch (MER, Fortune 500), which has raised nearly $13 billion from the governments of Kuwait, Korea and Singapore's state-run Temasek Holdings. In December, Morgan Stanley (MS, Fortune 500) said it received a $5 billion injection from China's state-run investment arm, China Investment Corp.

These funds, however, are expected to experience exponential growth in a short period of time. In the next three years, their combined assets under management are expected to quadruple to $7.9 trillion from $1.9 trillion, according estimated published last fall by Merrill Lynch.

Their growing clout was an area of concern for some lawmakers Wednesday, including Rep. Paul Kanjorski, D-Penn., who chairs the subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises.

"What do we do over the next decade or two as these numbers run up?" asked Kanjorski. "At what point will we lose control?"

Also attending Wednesday's hearing were representatives from Norway's state-run fund and Singapore's Temasek Holdings.

Both speakers, whose funds are considered among the most transparent by experts, acknowledged the vigorous debate about sovereign wealth funds and stressed their investments were simply an effort to provide for the beneficiaries of their funds - their citizens.

When asked about what impact a protectionist stance by the United States could have, Simon Israel, the executive director of Temasek Holdings, stressed that it would not only affect his fund, but would have domestic consequences as well.

"We believe that it would be damaging to our mutual interests in that respect," said Israel.