Tom Friedman is worried about our country. In his latest column, he tells us that our national leadership, both corporate and political, are too concerned about their own narrow interests rather than what’s good for the rest of us.

Friedman’s rhetorical procedure is to oversimplify the world by looking for (or starting from) just the right metaphor. Doubtless this helps him feel like he understands things, and it certainly makes him provocative and interesting to read.

But he makes one striking point. Since he and I come from different worldviews, I imagine this was a minor, obvious point to him, although it certainly wasn’t to me.

He recalls that the Fed’s bailout of AIG in September 2008 also had the effect of saving Goldman Sachs, one of AIG’s larger CDS counterparties. *Therefore, the US should own a slice of Goldman,* in addition to the just-less-than 80% of AIG that we own.

That’s interesting. By my training and experience, I’d always thought of the US’s role in the AIG bailout in a “corporate” sense, as another independent actor in an ecosystem of contracts and business relationships.

In other words, the Fed stepped into a situation in which an overextended market participant (AIG) was on the edge of failing. In the manner of an emergency round of outside funding, the Fed saved AIG, and took control and most of the equity as a result. It did this, of course, after trying and failing to find a private entity willing to do the same thing.

So far, this sounds like a classic lender-of-last-resort behavior. By absorbing the blast inside of AIG, the Fed prevented a long chain of failures in other institutions. It turns out that most of the trouble which blew up like a hurricane in the days following the AIG bailout was due to the messy failure of Lehman Brothers the day before. The AIG situation helped no one, but the Fed’s action arguably forestalled a far greater calamity. They did their job.

(Of course, I’m leaving aside that the Fed had no authority to rescue AIG, a non-depositary institution regulated primarily by New York State. True enough, and worth discussing, but not the point here.)

On what basis can Friedman argue that *Goldman Sachs* should now be partially owned by the US? Well, naturally, because AIG used part of the Fed’s $85 billion in rescue money to make good on their immediate obligations to Goldman.

This argument is intuitively appealing on the superficial metaphoric level where Friedman operates. But can it make deeper sense? Perhaps it does, because what the US did was not to contain the rot contained in one institution, AIG. The rot, in the form of unhedged risk, was arguably built into the fabric of the whole financial system.

Does it really make sense for Friedman to go on to say that the US ought by rights now to own a slice of Goldman as well as most of AIG? And is he saying that the US should also own some of AIG’s other counterparties as well? There were dozens, perhaps hundreds of them. Many, like France’s Societe Generale, are not US-based entities.

Maybe it makes sense because Goldman (although they heatedly denied it at the time and continue to deny it today) got into some very deep financial trouble, and walked up to the edge of failure themselves. The roughly $13 billion in collateral payments they reportedly received from AIG probably saved their bacon, although it’s possible they could have lined up another source of emergency capital.

There’s a simple way to answer the narrow question regarding Goldman. What happens when the FDIC takes over a failing bank? They honor the payment-clearing obligations of that bank with respect to its correspondents. The failed bank’s owners are wiped out, but the operations (and ownership) of other banks are unaffected.

That’s the way this has always worked. The reason we have this system is that bank failures can cascade like dominoes. There’s never been an expectation that resolving a bank failure creates rights in counterparty entities.

So there’s no direct case for the US to own a piece of Goldman because we bailed out AIG. Goldman didn’t default or breach any of its covenants with AIG at any point in the episode. It’s a judgment call, and one that Goldman would fiercely and rightly fight in court, to say that they would have failed without the AIG intervention.

But what of the larger point? The political authorities in the US acquired a responsibility to deal with the aftermath of the crisis, whether or not they formally own a slice of this company or that. And Friedman’s point is that they’re not handling it well.

Leave Goldman Sachs out of this picture. They’ve always tried to foster an internal culture of what Friedman calls “sustainable” values, but that’s only because they’re among the most ruthless and successful practitioners of situational ethics on earth. As a private entity, it’s hard to expect them to do the right thing for anyone but themselves. We don’t live in an ideal world.

But it leaves a bad taste to say the same thing about our political leaders. They’re supposed to be working on our behalf. But they’re now running around like chickens without heads, trying to position themselves to best advantage in the next round of elections.

Here Tom Friedman makes another striking point, this one quite uncontestable: This time *is* different. The US economy is in the process of transitioning away from managing abundance, and toward managing scarcity. Our public commitment to transfer income to senior citizens will necessarily reduce our overall level of prosperity for much of the next two decades.

Already you see this in the current set of corporate earnings reports. Companies are doing very well indeed, but they’re improving their bottom lines rather than their top lines. When your markets stop growing, you make more money by cutting costs, which essentially means cutting jobs.

There’s no free lunch here. A growing economy isn’t too hard to manage from a macro point of view. Just do what the political parties have always done: raise taxes, reward your friends in business and labor at the expense of the people at large, and profit at the ballot box.

But a stagnant economy is different, as well as being relatively unusual in the American experience. In these times, the standard parasitic behavior of politicians is very dangerous. We’re trying to square several circles at once. We have to stimulate the economy without setting up a deficit explosion a few years hence. And we need to keep people like Goldman Sachs in business without letting them take home all the marbles.

And let’s at least try not to forget some basic conservative principles in the process: freedom still matters, not least in the economic sphere. And government really is not equipped to solve business and financial problems. Government’s involvement is an unhappy accident arising from the recent crisis, and its solutions will necessarily be suboptimal. We’ll have to be happy with half a loaf.

With all that said, I must admit that the most hopeful thing I’ve heard recently is from Barack Obama. He said that he’s willing to be a one-term President if that’s what it takes to do the right thing. That would be a recognition that leadership in challenging times is about making choices that will make people unhappy.

Does Barack Obama really mean what he says? Is he willing to give us a real solution to our structural deficit problem and then leave office after four years? Well, he probably does. Can he execute? That’s always been the problem with Barack Obama. He’s a heartbreaker. His actions have never lived up to his words.

Still (dare I say it?), we can hope.