We are all familiar with the "Buy American" clause that is part of the $787 billion stimulus package and is designed to help U.S. companies battle foreign competition. But is it really doing what it's supposed to? This Wall Street Journal article takes a look at an American company that is losing a good deal of its business to foreign competition -- thanks to the Buy American provisions.

Apparently, there is growing resentment toward America for the Buy American provisions that has lead to a Buy Canadian campaign. In fact, one town in Canada (Halton Hills) is cited as one of roughly a dozen Canadian communities that are trying to freeze out American companies. The town's mayor stated, "We won't be taking any products from any country that is discriminating against us."

I recently attended a Lakers' basketball playoff game and took notice of the fact that Toyota Motor Corp. (NYSE: TM) was a major sponsor advertising at Staples Staples Inc (NASDAQ: SPLS) Center. This, while our home grown car companies are all on the verge of collapse.

As we write stories on the depressed economy readers frequently comment about "buying American" as a theme that will help the greater good by keeping jobs and money in the United States.

This patriotic notion got me thinking about what would happen if we carried it further? Would we stop advertising and promotion of foreign products? Would we restrict discussion of foreign products in the media all together? Would we limit the production of foreign products here, even if they are providing jobs for Americans?

As President-elect Barack Obama prepares his economic stimulus package, his advisers are looking into inserting a "Buy American" plank. An Obama spokesperson told Bloomberg that "We are reviewing the buy American proposal and we are committed to a plan that will save or create 3 million jobs, including jobs in manufacturing."

Earlier this week, I wrote about the fallacy of job creation and "job saving." It sounds nice politically but it is, in aggregate, bad policy.

The Bloomberg piece contains a number of quotes from participants that are troubling. Maryland Democrat Chris Van Hollen said that "we obviously want to focus our investments in areas where American industry will benefit." Van Hollen added that the stimulus is aimed at "generating American jobs."

Here's the thing: Taxpayer money should be used for the benefit of the taxpayers, and projects and infrastructure investments should be chosen based on their merit -- with job creation as a side effect.

Taking an enormous amount of money and spending it unnecessarily to create jobs while simultaneously enhancing the waste with a "Buy American" provision is just a bad idea. It would be a bad idea if we had the money and it's even worse because we don't.

News that Washington Mutual (NYSE: WM) is close to receiving a $5 billion cash infusion from a U.S. consortium bucks the trend that we have seen of late where U.S. banks take money from foreign sovereign wealth funds. I think that this is a very important step.

First, it shows that American private equity groups believe that U.S. banks are starting to get cheap and they are willing to pull the trigger on some big deals. This should help drive the market forward, as it will be a sign to many that the worst is over.

Additionally, it keeps the financial system in U.S. hands. I posted a while back about the potential security threats posed to the U.S. by foreigners taking control of our financial system. One of the big tools in the war on terror has been using the banks to track all kinds of money transfers. With foreigners taking over sizable chunks of the banking system, this tool will be much harder for the security agencies to use.

Thirty years ago, when Washington Mutual was just a small local bank operating in the state of Washington, its slogan was "a friend of the family." It looks as if it is going back to its roots.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 4/7/08

WakeUpWalMart.com, a rather ferocious watchdog group that tracks every move retailer Wal-Mart (NYSE: WMT) makes these days, is planning on launching a new $1 million television advertising campaign that will target a loyal group of Wal-Mart shoppers: conservative Republicans. The new ad campaign will use the theme of Wal-Mart "not being American anymore" and will begin in the South, Southeast, and Midwest regions of the country.

WakeUpWalMart.com believes that a "values conflict" exists among many consumers who like low prices but do not like to see more manufacturing jobs moving overseas. This is true from my experience; the double standard of wanting everything cheap (or for free) but wanting to keep things "American" is a sharp, dual-edged sword. You cannot have it both ways, although many millions of consumers may erroneously think you can.

So, based on that conflictual thinking, WakeUpWalMart will begin this month using TV ads that demonstrate Wal-Mart having moved away from founder Sam Walton's vision of buying American. The retailer, instead, drives companies to shut down U.S. operations and move everything to China to keep up with the retailer's demand to have "everyday low prices." With Wal-Mart directly sourcing about $9 billion in goods from China, is the amount really that low? For a company that had $344 billion in sales within its latest fiscal year, $9 billion seems like a drop in the bucket here. Wal-Mart has said that another $9 billion of goods from vendors who make goods in China can also be found on Wal-Mart shelves, but with these figures coming from a "spokesperson," how accurate are they?