Louisiana Purchase

In 1803, Thomas Jefferson paid about $23 million for 828,000 square miles that included Louisiana, some parts of Texas, most of Missouri, Iowa, Arkansas, some parts of Minnesota, Kansas, Oklahoma, most of Montana, most of Wyoming, parts of North and South Dakota and most of Colorado.

Jefferson got a lot of grief for his purchase. Some ideologues said it was unconstitutional. But he did it anyway, because he wanted access to the port of New Orleans. Napoleon Bonaparte sold the territory to the U.S. because he needed the money, and because he thought that the Americans would become a rival to the British, whom he despised.

He said, upon completion of the agreement, “This accession of territory affirms forever the power of the United States, and I have given England a maritime rival who sooner or later will humble her pride.”

The Louisiana Purchase has gone down in history as the best deal in American history. (The purchase of Manhattan doesn’t count.)

I thought of the Louisiana Purchase as I saw Treasury Secretary Henry Paulson defend his bailout plan. Paulson is a smart business guy, and he knows the first principle of finance is to buy low and sell high.

Andy Kessler wrote in The Wall Street Journal yesterday that the Paulson plan may be a similarly good deal for the American taxpayers.

As Kessler says, “My analysis suggests that Treasury Secretary Henry Paulson … may pull off the mother of all trades, which could net a trillion dollars, and maybe as much as $2.2 trillion — yes, with a t — for the United States Treasury.”

He goes on to say, “You can slice the numbers a lot of different ways. My calculations, which assume 50 percent impairment on subprime loans, suggest it is possible, all in, for this portfolio to generate between $1 trillion and $2.2 trillion — the greatest trade ever. Every hedge fund manager will be jealous.”

In other words, Paulson’s plan would rival the Louisiana Purchase as the best deal for the taxpayers in history.

I understand all the sturm und drang about the Constitution, and I get all the questions about encroaching socialism into American life. But the taxpayers could use a couple extra trillion dollars for a relatively small investment. Jefferson would be proud.

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