An answer to the $700 billion question?

That question being, Why????

I’d figured the financial bailout was a combination of

(A) the reasonable (a finger in the dike to avert a systemic collapse) and

(B) the mendacious (Wall Street using its massive political clout to call in the feds to save it from itself and receiving a platinum parachute from the ex-Goldman Sachs boss at the top of the Treasury).

But buried deep in Michael Hirsh’s review of Niall Ferguson’s new financial history of the world is this nugget, which we shall call

(C) the hand that feeds us (Buck up, foreign investors!  Don’t pull your love out on us, baby):

“Indeed, it’s no secret on Wall Street and in Washington that the real targets of President Bush’s $700 billion bailout plan were the foreign funds, including “sovereign wealth funds,” that keep America’s financial system afloat. Unless these foreign financiers — principally China and Japan — get reassurance that the global financial system can function properly again, Ameri­ca’s long period of growth and power may be coming to a close.”

This has been the fear ever since the ’80s:  what happens when foreign investors decide it’s time to pull up their stakes in America?  Now that would be a harsh episode of “cut and run.”

For now, my new answer to the $700 billion question is “All of the above.”

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