U.S. needs a sovereign wealth fund

The ultimate costs of rescuing the U.S. economy are beyond accurate prediction, but don’t be surprised to see recovery costing the American taxpayer well in excess of five trillion dollars. With corporate bonds subject to a worldwide US$60-70 trillion in credit default swap bets on whether they will default, bailouts could add up to considerably more than anyone wants to contemplate.

The latest US$20 billion injection into Citibank is essential, like many rescues yet to come. But if citizens are going to pony up sixty percent and more of the market value of a company in one fell swoop, they should get a substantial share interest, including seats on the Board of Directors. These directors would not run the company, but they would be tasked with the job that government regulators should have been doing all along — insuring that the nation’s shareholders are protected from the irresponsible practices and outlandish leverage that brought us to this juncture. Howls of “socialism” betray name-calling instead of understanding. The real socialism would be the bailout practice of pouring public money into private hands on far too generous terms.

By making all Americans real shareholders instead of guarantors, loan brokers, and charity givers in this bailout process, we would be approaching a more enlightened capitalism even though the common shares of rescued companies are held in government name. The ultimate revenue and tax consequences of a profit oriented sovereign wealth share-based rescue would make everybody a capitalist, with “shares” related to the individual tax burdens paid and reduced if the common enterprise is successful.

Goldsmith is a former director of the American Institute in Taiwan’s Kaohsiung Office, and author of “Jade Phoenix,” a novel of 1970s Taiwan.

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