Another day, and another financial institution falls casualty to the mortgage industry collapse.
Merrill Lynch lost how much money?
Politicians express concern that foreign Soverign Wealth Funds are stepping up and re-capitalising our depleted financial institutions, yet none are creative enough to posit a real solution: the creation of a US Soverign Wealth Fund.
We already sort of have a SWF, though its the third rail of American Politics: the Social Security Trust Fund.
But right now, there is a unique opportunity to change things.
First, developing and deploying a SWF to invest in US opportunities would help the economy. Its the perfect market based mechanism to provide stimulus when needed, such as now. Market based, because unlike other US Government Agencies, a US SWF would have market professionals, disciplite and a mandate to earn a safe and sizeable return.
Second, a US SWF trumps the foreigner card. If it makes sense for a foreign SWF to invest in US financial companies, then there would be an opportunity for a US SWF to hopefully beat them out, partly due to strategic reasons, but also due to cultural proximity and business relationships. Obviously, a US SWF would be staffed by the best talent, recruited from Wall Street.
And third, a US SWF might actually earn a better return than what the SS Trust Fund sees.
Are there risks? Absoulutely.
But more significantly, there is opportunity.