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What the Pros Say: Wall Street Welfare?

After refusing to step in to save Lehman Brothers, the Federal Reserve decided Monday to provide an $85 billion secured loan to insurance giant AIGto prevent its collapse.

WALL STREET IN CRISIS - A CNBC SPECIAL REPORT
WALL STREET IN CRISIS - A CNBC SPECIAL REPORT

This follows the bailout of mortgage reinsurers Fannie Mae and Freddie Mac and the rescue of Bear Stearns , where the federal government orchestrated a sale to JPMorgan Chase . The Fed also provided at least $87 billion to help underpin trades with bankrupt Lehman Brothers .

Investing experts and economists worldwide weigh in on AIG and what this recent run of bailouts means for financial sectors across the globe:

Fighting the Turbulence

Investors are in a panic mode, says William Quinn, American Beacon Advisors. But for those people who are patient, he says, they’re going to look back on this time as a great buying opportunity.

Good Eats

There are a lot of things out there that can scare the consumer,” says Don Wordell, Ridgeworth Mid-Cap Value Fund manager. “Commodity prices, gas prices have come down, so we think the consumer’s going to be ok.And Darden Restaurants is an excellent stock here." (See accompanying video.)







'Socialism' on Wall Street

There is a huge "moral hazard" problem where Wall Street firms have privatized their profits and socialized their losses, says Nouriel Roubini, co-founder & chairman of RGE Monitor.

Facing the Fear

There is compelling valuation in tech, industrials and basic materials, according to David Goerz, Highmark Capital CIO. And “as oil prices come down,” he says, “we want to think about consumer discretionary stocks.” (See accompanying video.)









'Tremendous Relief'

Nothing could be worse than an AIG bankruptcy in the short term, Pierre Gave, head of Asia research at GaveKal Holdings said.

Thin End of Wedge Vs. Smart Bridge Loan

The government is setting a dangerous precedentthat could lead to bailouts of all kinds of companies, Nouriel Roubini, co-founder & chairman of RGE Monitor, said. But Michael Sheldon, chief investment strategist at RDM Financial Group, thinks a bridge loan was the right thing to do, as a collapse of AIG probably would undo a lot of the work the Fed had already done to shore up the financial sector. (See accompanying video.)



Short-Term Good News for the Markets

Savanth Sebastian, equities economist at Commonwealth Securities, assesses the impact of the AIG rescue.

No Chance of AIG Collapse

"I think that we shall find today that the market is much less fragile than it was yesterday because people believed that AIG might fail," Sir Brian Pitman, senior advisor to Morgan Stanley, told CNBC. "If AIG had been allowed to fail that would have had a dramatic effect on the market. I never believed that the authorities would have allowed that."

There is compelling valuation in tech, industrials and basic materials, according to David Goerz, Highmark Capital CIO. And “as oil prices come down,” he says, “we want to think about consumer discretionary stocks.” (See accompanying video.)









'Tremendous Relief'

Nothing could be worse than an AIG bankruptcy in the short term, Pierre Gave, head of Asia research at GaveKal Holdings said.

AIG Rescue Steadies Credit Markets

"AIG was just too big to fail. They had a ($)30 billion exposure to CDS (credit default swaps), so ultimately ($)30 billion going down over the next 24 hours was going to have an enormous impact on the markets. Temporarily, it will certainly help steady things (counter-party risks)," Michael Sheren, head of leveraged finance syndication at Calyon Corporate and Investment Bank.

"(Trading) Volume is almost dead. Who wants to go out there and trade when they know that Lehman Brothers or Merrill or Dresdner, or whoever holds it, may dump their debt on the market." (See accompanying video.)

AIG Situation "Frightening"

AIG's bailout was absolutely necessary, or "$180 billion would have gone missing", Clem Chambers, CEO of ADVFN, said Wednesday. He called the future "frightening", as the market issues are spreading outside of investment banks.

Fed Gets to Pick and Choose

"Lehman Brothers, on the other hand, I think also the Fed realizes that moral hazard is a very big problem and you can't save everybody, so you have to pick the ones to save and the ones to let fail," Magne Orland, managing partner at Wegelin & Co. said.

There is compelling valuation in tech, industrials and basic materials, according to David Goerz, Highmark Capital CIO. And “as oil prices come down,” he says, “we want to think about consumer discretionary stocks.” (See accompanying video.)









'Tremendous Relief'

Nothing could be worse than an AIG bankruptcy in the short term, Pierre Gave, head of Asia research at GaveKal Holdings said.

Volatility to Remain High

"Volatility will remain high in a number of the financials because the market is going to have to sift out what's a moral hazard and what's an unconscionable risk," Rebecca Darst, options analyst at Interactive Brokers, told CNBC. (See accompanying video.)








Markets Under Black Cloud

The primary concern is that we have a major company like AIG that needs help and without it we could have absolute turmoil, Ben Lichtenstein from Tradersaudio.com told CNBC, adding there is a black cloud still hanging over the markets.

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