Jerry Jasinowski was president of the National Association of Manufacturers in October 2003 when he told reporters that government regulations added to U.S. manufacturing costs.

I liked his free-market tone, so I put a hypothetical bargain before him: In exchange for abolition of regulations he thought harmful, would his members give up all subsidies state and federal governments provide manufacturers?

Jasinowski said no, he’d rather keep the regulations than lose the subsidies.

The same basic question is now before America’s investment banks, but it’s not just hypothetical. At issue is the Federal Reserve’s new business of low-interest loans to investment banks like its loans to commercial banks.

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Commercial banks — where you might have your checking account, mortgage or car loan — are subject to a slew of regulations, in part because of their access to the Fed’s money.

Investment banks, on the other hand, have historically been free of these rules, such as limitations on what sorts of investments the bank can make or what fraction of its customers’ “deposits” the bank must have in reserve at all times.

But following its bailout of investment bank Bear Stearns in March, the Federal Reserve announced it would start a new “primary dealer credit facility” to make cut-rate short-term loans to investment banks.

The commercial banks, understandably, raised a stink. Why should Lehman Brothers and Goldman Sachs get the same subsidies we get but not have to follow the same regulations? Not simply a cry of “no fair,” the argument has merit, as this column pointed out in April: “If big investment banks are going to get federal money or federal guarantees, doesn’t Washington have the right to put limits on what they can do?”

Sure enough, lawmakers and regulators have been mulling since March new regulations on the investment banks. These banks have a strong lobbying presence in Washington, but they’re probably not powerful enough to keep the subsidies flowing while fighting off regulations. To adapt Patrick Henry’s rhetoric to the occasion: Are bailouts so dear or subsidies so sweet, as to be purchased at the price of chains and regulations?

Lehman Brothers, whose assets total $786 billion, thinks that’s a good deal, according to the Financial Times. Like many big businesses, Lehman in this case doesn’t mind regulation — which, after all, can keep out competitors — and loves subsidies.

Goldman Sachs, the world’s largest investment bank, with assets of $1.19 trillion, says “no deal”: Let the Fed close its lending window to investment banks rather than shackle these institutions with new red tape.

Why the difference? These companies’ financial situations give a hint. Goldman, in its most recent quarterly report, showed a positive gross profit, as it had for the years 2007 and 2006. Lehman, meanwhile, posted a $6.6 billion gross loss last quarter.

Goldman, like the whole financial sector, has plenty of headaches, but thanks in part to its correct bet on the housing slowdown and credit crunch, it is thriving compared with its competitors. Subsidized loans will help Goldman, but the weaker sisters in the industry need them more. Regulations may stabilize Goldman’s position, but they will keep Goldman from improving that position.

Goldman Sachs, in other words, is not the 2008 New York Yankees — the biggest payroll with the worst record. They are the 1998 Yankees — biggest and best. If you have the best team, you want robust competition.

An important distinction comes to light here: While bigger businesses, all things being equal, tend to favor subsidies (which their lobbyists are better at procuring) and regulations (which freeze the industry in place and keep out new competition), more confident, robust and successful firms (whether big or small) want freer markets with fewer crutches and fewer rules.

Goldman Sachs is pretty good at getting its way in Washington; in this case, its is the way of free markets. Here’s rooting for the big guy.