To Bail or Not to Bail? - Fast Money Recap (9/29/08)

Recap of CNBC's Fast Money, Monday September 29.

Big Losses As House Defeats Plan – Wachovia Corp (WB)

The Dow was down more than 8 percent, after the U.S. House of Representatives rejected a $700 billion financial-sector bailout plan, renewing fear about frozen world credit markets and the outlook for the global economy. He pointed out that the Dow saw its largest point loss ever and the S&P 500 had its biggest one-day loss since the crash of 1987. Jeff Macke said that as a society, we lost over $1 trillion in market cap today. Pete Najarian said this market is as tough as he has ever seen. The bailout's failure in the House added to losses suffered after Wachovia Corp became the latest major U.S. bank to succumb to the global credit crisis. Investors feared financial market turmoil would continue to spread around the world. In recent days, European authorities have been forced to step in and rescue a bevy of banks in Britain, Belgium, Germany, Iceland and elsewhere. But with blood on the streets and panic in the air, could this be that market bottom that we’ve been waiting for? “Right now we’re in a meltdown that’s panic driven," explains Zach Karabell. "A lot of people in the market have been thinking about for months."

Are There Any Safe Havens? – State Street (STT), Regions Financial (RF), Fifth Third Bancorp (FITB), Sovereign Bancorp (SOV)

Ratigan asked the traders for their opinions on safe havens during this rough trading environment. Guy Adami says gold might not be the safe haven that everyone thinks it is. He thinks playing gold as a trade against fear just isn't working. However, he says that if you're playing gold as an investment that is fine. Macke said people are going into cash, and we are getting old-fashioned runs on the bank. He says the bank stocks are going down because people are removing their money. Ratigan pointed out big declines in bank stocks today in names like State Street, Regions Financial, Fifth Third Bancorp and Sovereign Bancorp. Ratigan asked the traders what their level of confidence is that something will get done in Washington with the bailout plan. Karen Finerman said she is mildly optimistic and she says the reaction to the vote should send a message to Congress that the deal must get done. Macke said the selling accelerated because we don't know the rules. "I have no confidence in buying stocks in this environment, because they are actively making up the rules," he added.

Where to Now? - J.P. Morgan (JPM), Goldman Sachs Group (GS), Bank of America (BAC), Morgan Stanley (MS), Citigroup (C)

CNBC's Steven Liesman came on the show to discuss the next move for Congress. Liesman says Sen. John McCain's comments about going "back to the drawing board" made the hair on the back of his neck stand up. He said that as far as he knows, there is nothing with any support on the "drawing board" to go back too. Liesman says the injection of $600 billion this morning from the Federal Reserve was done to show that the Fed will come in and provide whatever liquidity is needed to banks right now. "The next step here is the Fed could become the clearing place or the "counterparty" for the banking system," he added. Liesman mentioned that the Fed seems to be creating a club with J.P. Morgan, Goldman Sachs Group, Bank of America, Morgan Stanley and Citigroup. He said the Fed will provide liquidity to these five institutions to the end and not let them fail.

Deep Economic Thinking

Mike Darda, chief economist of MKM Partners, joined the traders to discuss the outlook for the economy. He says the consumer recession is already here and it's going to get worse. "The credit markets and the equity markets are telling us it will get worse before it gets better," he said. Darda explained that by looking at long-term corporate bond yields, this downturn will be deeper, but it won't be the Great Depression. He says this recession will also be twice as long as the last one. "The longer these credit markets stay dislocated, we are going to go down deeper into the recession," he added.

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Comments

[aswo1:]

Next stop from Congress....abolish mark to market.

God help us.

They've taken short sales away from us.

The game is rigged.

Let's let the market punish stupidity. We owe it to our children.

Congress has heard the people. But they'll make on more try to fool us.

2008 Sep 29 10:20 PM

[russ:]

The market has punished the stupid, look at the bank failures-mergers-buy outs and asset write downs. Now is the time to punish the selfish and economically challenged House Repubs who risk panic for politacal ideology.

2008 Sep 30 08:36 AM

[doubleguns:]

Dems got us here with thier desire for every one to have a home including those with poor credit because THEY DONT PAY THIER BILLS!!! Now they are not paying thier bills, go wonder. Congress wants us to bail out the banks so we dont see who got the banks here when the investigations start as to what caused this problem. Barney Frank is so loudly out spoken FOR the bail out you can actually see the fear in his eyes. He is afraid the bloodhounds will pick up his scent since he is all over the problem you could say he is the problem.

So they want to sell us paper at something over 22 cents on the dollar. The banks are buying each other at fire sale prices of 1 cents on the dollar and they wont accept 22 cents on the dollar, Nooooooo!!!! they want to fleece us for 60-80 cents on the dollar. Are we fools or what?!!1
No bail out!!!!! Unless we get the pennies on the dollar deal too!!!! Why should the banks buy at 1 cent on the dollar and sell to us at 60 cents to make a quick mark up of 6000% Don't fall for this bail out. The fox are trying to get tax pays to pay up to keep them in thier crystal palaces.

The final point is that there is no political ideology here. Some very astute republicans can see this bail out for what it truely is. A TAX PAYER FLEECING!!!!!

2008 Sep 30 09:14 AM

[Rolandownth...:]

It's all a lie. Listen to Ron Paul; the money, some 600 billion has already been printed up, without the bailout. The bailout is for the rich! See the truth.
ca.youtube.com/watch?v...

2008 Sep 30 10:21 AM

[hwood007:]

I think the SEC can pause the mark-to-market rule without congress and should do so for a month or so. I am so glad I do not buy mutual funds, GSEs, or low cap companies. I always listen to Ron Paul, I usually do something else.

2008 Sep 30 11:34 AM

[Rolandownth...:]

The best argument yet!
mises.org/story/3132

2008 Sep 30 10:29 PM