The United States has created the best sovereign wealth fund ever.

In return the Fed—which is financed by the Treasury—gets a claim on the company’s assets. That’s a euphemistic way of saying it gets to take control, without calling it a nationalization of the biggest U.S. insurer. But if anyone had any doubt about who calls the shots, the Fed got to oust AIG’s management team and put its own men in charge. The government also did that at Fannie Mae and Freddie Mac, where U.S. taxpayers have taken on mortgage exposures worth some $5 trillion. So think of it—unlike most SWFs, the U.S. government gets not only to meddle in the affairs of its investee companies, it gains control and nominates its executives.

And here’s the other thing—timing. The U.S. government is getting companies like Fannie, Freddie, and AIG at the very cheapest valuations. Sure, it’s taking on lots of the liabilities. But it’s paying nothing for the equity. It’s functioning more like a vulture fund, swooping in on distressed companies a step away from bankruptcy and taking control by snaffling up their debt. Moreover, Uncle Sam’s SWF finances itself incredibly cheaply. It sells tens of billions in Treasury bonds at ultracheap interest rates—the 10-year bond only pays investors 3.7 percent. And guess what? The lion’s share of these Treasury bonds is bought by foreign governments and central banks.

Finally, all of this money goes to supporting U.S. companies, with thousands of American employees, and their assets—thus far mainly mortgages. It’s not like the government of Kuwait sending its taxpayers’ surplus cash to help keep New York- or London-based investment bankers in Hermes ties and meeting their Maserati Quattroporte payments. Mr. Paulson’s fund may lose as much money as its international cousins, but at least it will amount to a squandering of taxpayers' money on the taxpayers themselves.

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