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Let The Big Incompetent Banks Go Out of Business

While I share the nation’s lovefest with Obama, I am increasingly coming to the conclusion that both his and W’s efforts to prop up the economy by giving mega-banks oodles of cash is the wrong approach.  The theory seems sound; give big banks money and they will give it to us to spend, and the economy will chug along.  But as we know now,  this reasonable theory is based on the premise that the banks will pass though the money, which we now know is not the case.  It also assumes that all big banks are competent and ethical, which is certainly in question.  I guess we should have been alerted to this based on the way many banks handled their money before the financial crisis.  Finally, it puts a middleman into the process that adds cost, complication, and slows down the process.

Hmmm. Lets assume you have a greedy and incompetent brother that got into financial trouble when he blew all his money gambling and by investing in weird and untrackable investments.  Lets also assume that you are a nice person that wants to make sure his family doesn’t starve.  Would you give him the money to buy food for the family, or would you just buy the family food or give it to someone trustworthy that you know will do the right thing.  Most people would not hand over cash to the idiot that lost the money, but somehow this made sense to the government.

Throughout my career I have dealt with small, medium, and mega-banks, and almost without exception I can tell you the small and medium-sized banks were more competent, and much more community focused than the faceless multi-national congomerates that are driven by one thing – their stock price.

If the government wants to spur economic activity, bypass the banks and loan the money to small and medium-sized companies that have fresh ideas, employ people, and will advance the country as a business and technological leader.  Employ the capital wisely as opposed to letting it prop up an incompetent bank’s balance sheet.

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