The Capital Strike

There were several interesting exchanges on CNBC's Squawkbox program this morning.

There have been stories this week, both on cable news, and in text media, regarding GE executives Jeff Immelt, CEO, and Jeff Zucker, head of the media business, holding a meeting recently to read the riot act to on-air personalities who have been voicing views that were too conservative and critical to the current administration.

Thus, I was surprised to hear Mark Haines lashing out at the administration for not allowing financial companies to repay TARP money as they wished. Haines held firm in his stated belief that the Treasury enjoys having control and influence over banks, and has no plans to relinquish their ability to coerce these institutions.

Separately, Rick Santelli skewered liberal puppet and economic idiot Steve Liesman on the subject of the stress tests. Liesman attempted to portray Santelli as preferring a pre-1930s banking system in which deposits were lost amidst bank failures. Santelli, however, simply pointed out that the stress tests were about two years too late, and by the same people who missed the problems the first time around. And, as he has consistently held, Santelli supported Anna Schwartz' position that insolvent banks should be closed, so that markets would know, by the simple act of survival, which are sound.

As if he was some student toady of the faculty which had assured him protection, Liesman remarked, during Santelli's final comments,

'Just let him go....'

Taking it all in, I wonder how much longer Santelli and Haines have on the network.

Add Joe Kernen to that list.

In another discussion, he asked why anyone in their right mind would invest in banks when, on one hand, the sitting president is coercing them into making more bad credit card loans, while the same president's Treasury Secretary is threatening banks with his 'stress test.'

Kernen went on to note the insanity of excoriating banks for having made bad loans, and taken government funding, only to now complain that the surviving banks aren't making enough loans. He finished by observing that a parade of sovereign wealth funds have lost nearly all of their late-2007 investments in various US financial institutions, e.g., Citigroup and Merrill Lynch, to name just two.

Even the more liberal Becky Quick and Carlos whathisname nodded in assent when Kernen asked why any intelligent person with capital would commit it to any US financial institutions in the current environment.

To complete the scene, one of the program's guests, Donald Trump's daughter, Ivanka, rather young and with no particular length of business experience, echoed Kernen's views and asked why anyone would risk capital in a climate of such capricious Congressional temperament?

The overall image I took away this morning is a strong sense of a genuine, FDR-era capital strike in the US economy. Thanks to inconsistent and thuggish governmental intervention, cancellation or violation of contract law, violation of its own Sarbanes-Oxley regulations (e.g., BofA's CEO Ken Lewis directed by Treasury Secretary Hank Paulsen and Fed Chair Bernanke to keep silent on the Merrill Lynch losses and not inform his shareholders prior to the acquisition approval vote), contrary direction to banks to lend, but not make bad loans, and the AIG bonus flap, no sane investor would think to participate with government for the foreseeable future in any financial sector investments.