New York Times columnist Thomas Friedman says that President George Bush is right about something. What? That the Feds need to get out the banking business as soon as possible. As his Sunday column warns:
Let's imagine this scene: You are the president of one of these banks in which the government has taken a position. One day two young Stanford grads walk in your door. One is named Larry, and the other is named Sergey. They each are wearing jeans and a T-shirt. They tell you that they have this thing called a "search engine," and they are naming it — get this — "Google." They tell you to type in any word in this box on a computer screen and — get this — hit a button labeled "I'm Feeling Lucky." Up comes a bunch of Web sites related to that word. Their start-up, which they are operating out of their dorm room, has exhausted its venture capital. They need a loan.
What are you going to say to Larry and Sergey as the president of the bank? "Boys, this is very interesting. But I have the U.S. Treasury as my biggest shareholder today, and if you think I'm going to put money into something called 'Google,' with a key called 'I'm Feeling Lucky,' you're fresh outta luck. Can you imagine me explaining that to a Congressional committee if you guys go bust?"
And then what happens if the next day the congressman from Palo Alto, who happens to be on the House banking committee, calls you, the bank president, and says: "I understand you turned down my boys, Larry and Sergey. Maybe you haven't been told, but I am one of your shareholders — and right now, I'm not feeling very lucky. You get my drift?"
Maybe nothing like this will ever happen. Maybe it's just my imagination. But maybe not.
Emphatically, it's NOT his imagination. This is exactly what will happen if the Feds own shares in banks for long.
Whole column can be found here.
Note: Of course, Google did not get their start up capital from a bank, but the point is still relevant.