The things that aren't yet happening - and why

This week's de facto nationalization of General Motors is part of a growing chain of government actions giving pause to business decision-makers and long-term investors.

In a Forbes column (written before GM's announcement), Thomas F. Cooley, dean of the Stern School of Business at New York University, says government overreach is to blame for the "things are not happening" in the markets and the economy.

Many investors are [still] sitting on the sidelines, as is much money. Why? Because it is impossible to know what the rules of the game are. And that's because the administration and the Congress keep changing the rules in capricious ways in pursuit of larger political objectives.Government interference in the normal conduct of business has had a chilling effect on financial markets and threatens the progress of the recovery. The Treasury and the Fed have created many new programs to provide liquidity to the financial system, to help banks restructure their balance sheets and to re-invigorate securitization markets.

So far, the interest in these has been distinctly muted because potential participants fear the longer term consequences of getting involved with any of these programs.... They are afraid of the strings that may be attached....

Investors, other than the banks who desperately needed TARP funds for survival, are leery of any program that uses them. Anyone who took TARP funds has been subject to government interference in managerial decisions....

The Obama administration has shown repeatedly that it is willing to change the rules and even challenge the sanctity of contracts in the interests of its political agenda....

Why would private capital get involved when the rules of the game are so capricious? No one would take that gamble when it is clear that, in dealing with the government, private capital will always take a back seat to politically powerful entities.

What really has long-term investors and business decision-makers concerned is that tentacles of government seem to be growing longer and reaching deeper with each passing week. There is no sense of, "Whew! We're past that. Now things can start settling back to normal."

Instead, we are awakening to the realization that there will be a new normal - but no one (outside the administration anyway) knows what that new normal is going to look like. What is growing increasingly clear, however, is that when Mr. Obama spoke during his presidential campaign about "fundamentally transforming the United States of America," he meant it.

Update: From an editorial in Investor's Business Daily about GM's "pre-packaged bankruptcy" (and related actions by executive branch):

We pored over Article II of the Constitution, known as the Executive Powers Clause. Nowhere is the White House granted the right to override the time-tested bankruptcy process, to use Treasury money raised by taxing Americans to buy or bail out companies, to fire CEOs, to micromanage corporate policy, or to abrogate lawful contracts made by private parties.Yet, our government has done these things and more - leading to a corrupt GM bankruptcy. The damage to our system of corporate capitalism and the rule of law is severe.

The IBD editorial board is hoping the Obama administration's actions will be challenged in federal court.

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Joseph Slife is a contributing author and editor for SMI. Visit www.soundmindinvesting.com to learn more.