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Thomas Friedman: Not A "Details" Guy

By Anonymous

Thomas Friedman warns his readers that having the government as a shareholder in banks might stifle innovation because the government might force banks to become overly cautious.

If Friedman had taken the time to look at the details of the recapitalization plan, pesky though they are, he'd see that the government is only getting nonvoting shares. He also suggests that banks might become overly cautious because their CEOs will be worried about a scolding from a Congressional committee, which is an argument that only someone who has never worked in either finance or government would make. (Note that in Friedman's hypothetical example, the two young entrepreneurs walk into a bank and immediately talk to the bank president, who then personally evaluates their loan application. I wonder if Friedman has ever actually been to a bank before.)

He also says that the thing we need more than anything is "better management" at banks. How does he propose that we accomplish this?

Save the system, install smart regulations and get the government out of the banking business as soon as possible so that the surviving banks can freely and unabashedly get back into their business: risk-taking without recklessness.

So in order to get better management at banks, Friedman thinks the government needs to get out of the existing management's way. Wow.

Final score for today's column:

Logic - 2; Friedman - 0.

Full post as published by Economics of Contempt on October 26, 2008 (boomark / email).