Anders Åslund of the Peterson Institute for International Economics argued recently that the real problem with so-called sovereign wealth funds is not that Arab, Chinese, and Russian governments are buying up great swathes of Western economies, but that these state-owned funds are liable to make bad investments.

China is a case in point. Last year, China Investment Corp. bought nearly 10 percent of both Blackstone and Morgan Stanley, neither of which is doing so hot right now. Blackstone has since fallen by half and Morgan Stanley by a quarter. And Citic, a Chinese bank run by the government, was all set to purchase nearly 10 percent of Bear Stearns until Friday's debacle. The only thing that saved Citic from making a terrible deal? Bureaucratic red tape in Beijing.