Treasury Secretary Tim Geithner’s new plan for the financial markets offers a novel danger: the trillion-dollar “public private investment fund.”

Through the fund–PPIF?–the government likely will use the promise of government guarantees and cheap financing to entice hedge funds and the like to buy up badly structured loan securities from flailing banks.

This “partnership” blurs the line between the public and private sectors, just when we need a genuine, entrepreneurial, non-government-backed private sector to get us out of this mess. We don’t need more government-guaranteed enterprises, especially ones that come in the guise of private firms.

The appearance of private-sector involvement here may mollify critics who are worried that the government is taking over everything.

But the private sector isn’t the private sector when it’s in bed with the government.

The real economy risks suffocation by this huge misdirection of taxpayer resources, with some profit-seeking firms just acting as a handy cover.

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