Now-famous Chicago exchange floor reporter says state intervention in banking system is a drag on taxpayer money.
As rumors of nationalization swirl about Bank of America (NYSE:BAC) and Citigroup (NYSE:C), the market indices have fallen.
On Feb. 23, Larry Kudlow, co-host of CNBC’s “The Call,” asked CNBC Chicago Mercantile floor reporter Rick Santelli if the government should be involved in propping these troubled banks. Santelli made waves on CNBC’s Feb. 19 “Squawk Box” railing against the Obama Administration’s mortgage bailout plan.
“Listen, I think the government should stay out,” Santelli said to Kudlow about the banking system. “I mean, look at the last plan where we put that money in there. There was talk about obviously the preferred shares and the dividend payments and paying it back, and now that’s under review. You know, so we’re revising the last plan. We’re throwing more money in.”
The resolution, according to Santelli, would be to protect the depositors, but let the institutions fail.
“You know Larry, I don’t know how to put this in legalese, but there should be some type of special bankruptcy organization that the government set up so if the banks go down, they do their best to organize it – make it so that it’s not going to make the system collapse, guarantee, get the FDIC,” Santelli said. “But I think we’re throwing … good money after bad and the bank system has been in shambles for how long with so much money thrown at it, some involuntarily. And I don’t see the progress. Keep the government out.”
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Santelli said that helping out the regional banks that didn’t engage in risky behavior would save the banking system. The other banks are largely insolvent and not worth saving, he contended.
“There’s a lot of regional banks we can try to bolster up,” Santelli said. “All this is good. You know, listen to the original question we asked, ‘Is it worthwhile to save the banks?’ Is there anything left to save, really?”
Co-host Larry Kudlow pointed out the trend – that as the government intervenes, more and more has gone wrong.
“All I know is since Fannie, since Freddie, since AIG, since Lehman, since Bear Stearns – all holy hell has broken out,” Kudlow said. “If this is the solution, show me the problem. Somehow we have got to have a better way.”