Circle the Wagons With Wells Fargo

If you had $10 billion to invest, what would you do with the money? Personally, at this point, I would probably look to put it all in U.S. Treasury notes, earn 3.5% a year, happily count my $140 million a year in interest payments, and sit back to enjoy the adoration of my family.

But what if you're a foreigner with currency translation risks, already owned half a trillion dollars in Treasuries and wanted to protect that much larger investment? Well, you might do what the sovereign wealth funds (SWFs) have done: Do your part to prevent the U.S. financial world from collapsing and embark on a new career as the director of a commercial bank.

On one level the SWFs' investments in Citigroup(C Quote) and UBS(UBS Quote) look risky and naïve, in other words, because who in their right minds would want to own companies beset by so many deep-seated and unknown problems? But if you consider that the moves were attempts to bolster the value of much larger investments, then they make some strategic sense.

Moreover from an investment standpoint, the lesson to glean from the SWF investments is that plain-vanilla banking at the likes of Citi and UBS might still be an awesome business. After contending with an inverted yield curve for much of 2006 and 2007, rapidly declining short-term rates, courtesy of the Federal Reserve, are boosting the difference between the amounts banks pay for deposits and the amount they receive for loans. The government is basically rebuilding the banks' balance sheets as we speak, dropping billions of dollars of net interest margin in their laps. ...