Children didn’t make up Santa. Parents did. Santa may be generous. But naughty kids get nothing but coal. Santa is a ruthless administrator of justice.

This is not a kid’s fantasy. But it is a parental one.

So my holiday message to President-Elect Obama and his new Treasury Secretary – Timothy Geithner is this…

Don’t ask banks to be your kid’s wimpy version of Santa Claus – giving out gifts to all those who ask nicely … or scream the loudest (autos, anybody?).

Banks can make your dreams come true. Or they can destroy them.

In either case, I’d like them to lend responsibly.

I’ve seen both sides of what banks can do. And I’m sure you have too.

I remember getting a bank loan for my first home. I needed to prove that payments would take up no more than 20 percent of my disposable income. I needed to prove I had a job. I had to show a good credit rating.

Jumping through all these hoops wasn’t optional. No exceptions allowed.

When I got the loan, my wife Cec and I went out to celebrate. It was a big deal.

Then there’s the other side…

My Cousin Harvey had built his door and window business from scratch. They had so much business he applied for a loan to build a bigger facility. The company’s bank gladly gave it to them. After all, the company was flying high on the mini-real estate boom that visited the greater Boston area in the mid-1980s.

Five years later it reversed direction. Housing prices plunged. And housing construction shrank to almost nothing.

Even after downsizing, the company could barely pay its bills. It dipped into its revolving loan more and more. Until one day the bank took it away.

The company lasted a month more before shutting its doors.

I’ve seen the same thing happen to publicly listed companies like the small Texas-based oil company that seemingly was sitting on top of the world.

I was on the phone with the CEO and he was sounding his normal confident self.

The drilling was going great, he said. Every well tested so far found oil. They were ahead of schedule. Their big investment in a potentially huge oil basin off the coast of Nicaragua was also making better-than-expected progress.

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Then he dropped the bomb.

The company’s bank was withdrawing their loan.

The CEO tried to cover his tracks. “As far as I’m concerned,” he said, “This gives us an opportunity to find a better bank … a bank that really believes in us.”

But without access to bank credit, they couldn’t pay their bills. Their credit rating plunged. Other banks wouldn’t touch them.

They were forced to sell their promising parcel off the coast of Nicaragua. It bought more time for them. But that parcel was a big part of what made the company so attractive. More shareholders sold off. Their stock price plummeted.

Ten months later, they were de-listed from the New York Stock Exchange. Fifteen months later they declared bankruptcy.

It happened a couple of years ago. But I believe it gives you a sneak preview into 2009 … except for one thing. Next year these won’t be isolated incidents. The market will be littered with dead corpses whose money lifeline was cut off.

Banks matter.

They matter a great deal.

Banks will give loans to companies with cash or with a high credit rating. Other companies will see the back of their hand.

Same thing with individuals. Banks will lend to those who need the money the least: the careful savers … the homeowners who didn’t cash out their home equity … the very well-off.

It’s the nature of the banking business that when you need them the most, that’s when they fade from view.

That doesn’t make them evil. But it doesn’t endear them to the rejected – whether they’re companies or individuals.

And now, with the economy swooning, the government wants banks to act like a three-year old’s version of Santa.

Isn’t that how we got into this mess in the first place?

They don’t want banks to become responsible careful lenders. It would make a sick economy even sicker.

The lesson is clear. If you’ve got cash, nourish it. Hoard it. Save it. Because if you run out, your bank won’t have your back.

Cash is king.

Remember that when you’re looking to invest in 2009. Companies out of cash could also be out of luck.

Happy New Year,

Andrew

A worsening economy has pushed the market down.

A global recession has pushed it down further.

Will the latest Wall Street scandal push it down more?

Some of the hundreds of losing hedge funds have written letters to investors saying that they won’t accept requests for redemptions until a later date.

Most, however, have been forced into selling to meet an avalanche of redemption requests for January 1.

This massive selling is another reason why the market fell so quickly. Could we get a little rally after January 1?

Institutions will have to reinvest this money. Treasuries and money-market funds are returning next to nothing. The stock market could be the beneficiary by default.

But the Bernie Madoff (is it pronounced “Mad Off” or “Made Off” - as in made off with the money) $50-billion rip-off (Good news: he may have cheated investors out of as little as $30 billion!) may trigger a new rush by institutions to get their principal back. A lot of funds of funds had exposure to Madoff.

That would mean more selling and could blunt a bear rally. Thanks a lot, Bernie.

How Low Can Gas Go? … The average price of gas nationally is $1.66. It’s going to go lower. Next year, somewhere in the country, it’ll go below a dollar. Who’s going to want to pay a premium on fuel-efficient cars then?