People have always lent money to banks and banks to people; this is how banks work!  Those with money loan it to the banks at interest, and the banks loan it to people at a higher interest.  This is how they legitimately make money.

It sounds like this congressman Mr. Friedman was listening to, doesn't understand banking (which is no surprise) and apparently Mr. Friedman doesn't either.

Mr. Friedman goes off track early in his essay and continues derailed: "The banking system is the heart of our economy."  Sorry Mr. Friedman, the Federal Reserve is; and by focusing our attention here (and also on the various "interventions" the government has imposed over the years) we begin to understand why the banks behaved the way they did, and why our economy is in shambles.  Your recommendation to Obama, is more of the same problem -- which I am sure Obama will deliver.

Unfortunately, Mr. Friedman is good example of the very sad reality we share today. I feel particularly saddened today (January 20th, 2008): not so much because Obama was sworn in as president, but because America is cheering the state!  What ever happened to the sceptical-of-government, liberty loving, and personally responsible American? He is no more.

By this the state is unfettered; beware, Leviathan roams free!

I thought the context of his comments was about the bailout....not banking in general.  With the bailout these banks have been given huge amounts of money (a loan) and there is no accountability.  He was trying to make the point that they need transparency.  In the context of a bailout then I think his comments are right on.

I agree that Friedman's comments were in the context of the bailout, but calling the bailout "people loaning to banks" and the idea that such a thing is new, is absurd.  As I pointed out, people have been loaning to banks since banking began; but it is only worse to call the bailouts "people loaning to banks" because it is NOT: the money is being printed by the Federal Reserve. In-as-much the bailout money is being taken from us through inflation and taxes, it is certainty not a loan: it is thievery.

Friedman's confusion about the bailout was the least of his error, and perhaps dismissible, but the notion that the government can and should fix this financial crisis is an economically unpardonable sin.