How the Bailout Is Like a Hedge Fund.

It's massively leveraged. It's buying distressed assets. It's taking equity stakes …

By Daniel Gross
Posted Wednesday, Oct. 1, 2008, at 3:35 PM ET

The Wall Street bailout is alive again. In an effort to make the $700 billion bailout palatable, the architects of the law have larded it up with all sorts of goodies, such as increasing the levels of deposit insurance, sparing some taxpayers the ravages of the Alternative Minimum Tax, and extending tax breaks for alternative energy. Henry Paulson's three-page sprig has sprouted into a 451-page Christmas tree. (The current version of the bill, in all its lengthy glory, can be seen here.)

What's most interesting about the Emergency Economic Stabilization Act of 2008 is just how much it reads like a prospectus for a hedge fund. In the past, hedge funds—secretive pools of capital—were open only to qualified (read: rich) investors. But with the stroke of a pen, President Bush will soon make all American citizens investors in the world's biggest fund—and a democratic one at that. Taxpayers won't just be the investors. We'll own the management company, too. Best of all? For at least a few months, we'll have the former CEO of Goldman Sachs run our investment for a very small fee. Call it the "Universal Hedge Fund."