I recently had a conversation with a friend in the trade who owns and has run a profitable business for the past 30 years. Like almost everyone in the industry, he’s having a difficult year. His bank is unhappy that his sales, receivables, and inventory are out of compliance with his loan agreement. As a result, the bank wants to call his loan and end their 25-year relationship with his firm.

Not long ago the taxpayers of the United States were treated to a series of financial bailouts that first were directed to the financial community because of questionable loans made by some banks encouraged by programs of Freddie Mac and Fannie Mae and the U.S. Congress. We were told we had a liquidity crisis and that the taxpayers needed to step to the plate to stabilize the situation in order to get banks lending again.

Since that point in our history, U.S. taxpayers have provided billions of dollars to bail out Chrysler and General Motors. While this was occurring, the banks, instead of lending money, were reducing the number and dollar value of the loans they were making.

I’ve begun reading Jim Collins’s book How the Mighty Fail. In it Collins relates the story of how a banker, Amadeo Peter Giannini, traveled from San Mateo, Calif., to San Francisco in 1906 by train, and finally by foot, to recover the cash in his bank after the San Francisco earthquake.

"Giannini returned to San Francisco the next morning and found himself at odds with other bankers who wanted to impose a six-month moratorium on lending. His response: putting a plank across two barrels right in the middle of a busy pier and opening for business the very next day. ‘We are going to rebuild San Francisco,’ he proclaimed. Giannini lent to the little guy when the little guy needed it most."

Giannini subsequently changed the name of his bank from the Bank of Italy to the Bank of America, which went on to become the nation’s largest and most successful bank!

The 1906 earthquake is an apt metaphor for the financial problems we have experienced this past year. It’s interesting to note, however, that the effective actions of one man, Giannini, contrast with the actions of the federal government in the current crisis.

The objective of the bailouts, perhaps better positioned as loans, was to stabilize the financial system, to keep things going until a return to a more normal business environment occurred. You would think that the people who put together these rescue packages would have had a little foresight and some control mechanism in place to assure that the funds lent were actually used for the purpose intended: to lend money for working capital requirements of businesses and for consumers to purchase homes, cars, and other things they need. Instead we have banks keeping the money close to home.

I’m not sure how all this will play out for my friend. I sense that it’s a classic case of ineffective government intrusion under the mistaken belief that a government, any government, can control the market place. The second question is: Where are the current-day Gianninis?