"You want ME to just let those filthy creatures FREE?"
Shrek sighed. "I figured asking wouldn't work, but I had to try. It wouldn't make sense for you to simply let these people free especially after you've done something so horrific as to kidnap them. However, you seem like the kind of man who might agree if I did something for you in return. What is it you really want by getting rid of them? Are you scapegoating them with your problems or is it some weird obsession with cleanliness? The eery perfection of your little castle has not gone unnoticed."
Farquaad gaped. "Such insolence. You do not understand, these rats have tortured me since grade school! They cast spells on me, and while most would wear off, I'm stuck shorter than I'm meant to be. They are a poison, they are rowdy, and they cannot be trusted." His brows dipped with determination. "And MAGIC," he spat the word, "is responsible for keeping every princess locked away in some terrible situation."
"Sir," Shrek wanted to at least suck up a bit by being 'proper and respectful,' just in case that would help his argument even if only in a logical fallacy kind of way, "that's awful. No one should ever have assaulted you, and your anger is certainly valid." The vertically challenged man looked up, and the ogre wondered if he had not had his feelings validated before. "Anyone would be angry if that happened. In fact, I feel angry for you. Injustice bothers me a great deal. But if you can just try to step out of your personal feelings for a moment, you'll understand why you can't blame an entire group of people for the actions of a few individuals. You're probably a smart man, so I'm sure you can do that. It could have been anyone who harmed you, it's just that there's more fairytale creatures around than regular humans, so with the greater sample size, you were more likely to have been hurt by one of them. The same goes with the princess' unfortunate situations. I don't like that they're thrown in towers or attacked by witches, but anyone could have done horrible things, it just happened to be a magical person because there's more of them around."
The short male considered this. "Okay, I can see where you're coming from on that point. But they wreck the economy. Many of them can fabricate money with a flick of the wand, and this leaves the rest of the population in poverty. I get complaints every day to stop this, and so I got rid of them."
"Ah," the ogre nodded, "but you're a much more creative man than that. Just let people decide what they will and won't accept for payment. Your people will figure it out if you don't try to control their money so much. You'll gain respect for your merit, here. Suggest that humans have magical creatures pay in services if they don't want to get screwed over. Create classes for people who intend to open businesses to explain why this is important. Caution them to be wary of other humans who get rich quick. Make it socially unacceptable. People trust your judgement, so you have real power there."
Lord Farquaad stood in silence. He had not had his thoughts challenged in a long time, as his subjects tended to agree with whatever he said. "Alright," he said slowly, "I'll let them go. But will you do me a favor?"
"Probably."
"There's a princess, her name is Fiona. She's locked in a tower guarded by a fire-breathing dragon, and I wanted to marry her so I could be an official king. Will you rescue the lady for me?"
Shrek thought for a moment, then glanced to the man with a stern expression. "I'll rescue the princess, but if the two of you aren't in love, I promise you that I will give her the freedom to not marry you."