Posted by
Thinking Out Loud on Friday, March 13, 2009 9:28:23 AM
I expected the outcry from progressives when the evil banks who received money form the government didn't turn around and lend that money to people. Never mind of course that asset values have plummeted and most banks are (rightly) cautious about new lending. Also never mind that their balance sheets are weak (on average) and new capital is pretty scarce these days. The banks should have lent the money becuase we the taxpayer gave it to them. Well, actually, we didn't give it to them, we bought stock but in any event...
What has been far more surprising is the reaction of many voices that decry the banks for making investments in China or Dubai or whatever using exactly the same logic with exactly the same stupid results. For goodness sakes, if you run a bank, you're supposed to make as much money as you can. If that means you invest in Dubai because it's the best investment you can make right now then so be it. It's frightening that people think that because they've invested in an institution, the institution should fulfill their objectives rather than those of the institution. What's depressing is that people who are notionally supposed to believe in free markets seem to believe in them unless the outcome is one they don't like.
It's rather like people saying that government shouldn't legislate morality. This is a phrase that both conservatives and liberals use but they really mean government should legislate morality in ways I don't like. Neither side believes in the principle but the principle sounds better than saying "I want government to do what I want it to do." which is what they really mean.
But back to the banks. If you want a bank to do what you want it to do, start your own. If you want to invest in a bank, then you should expect it to invest to maximize its returns. If the government or the people want banks to make investments where they want them, then don't nationalize banks, start government ones instead. I rather doubt they will attract a lot of investors given their likely investment strategy but then again, they can always use taxpayer money to make up the difference.