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Financials Were In Death Spiral, Says Finerman

Thursday, 18 Sep 2008 | 6:25 PM ET

CNBC has learned that an historic meeting is planned for Thursday evening to discuss the financial and housing crisis.

Holy smokes, what a day! exclaims Guy Adami.

THE PLAN TO SAVE WALL STREET

Thursday evening Fed Chairman Ben Bernanke will accompany Hank Paulson to a meeting with full Congressional leadership and discuss solutions to the financial crisis, reveals CNBC’s Steve Liesman on Fast Money. It’s going to include both houses and both parties.

“Something big is clearly afoot,” he says.

Paulson to Meet With Congressional Leaders
Treasury says Paulson will meet with Congressional leadership on current market conditions. The Fast Money traders and CNBC's Steve Liesman discuss.

Earlier in the day CNBC reported that conversations were underway in the Treasury to put the Resolution Trust Corporation (also know as the “RTC”) back in business. The entity was created in 1989 amid the savings and loan crisis and liquidated assets of those institutions until it was folded into the Federal Deposit Insurance Corp in 1995.

Such a move, according to its advocates, would allow banks to shovel bad debt off their balance sheets and send them back to business as usual. In turn, that could allow the housing market to recover because it would restore banks willingness to lend.

The market liked this idea better than any idea they’ve heard so far, explains Dylan Ratigan.

In theory it’s not a bad plan at all, muses Karen Finerman. The financial system was in a death spiral and something had to stop it.

Now, I’m really not understanding the specifics of the plan, she says. Are they going to own equity in the banks? Are they going to own assets? And if so, how will they dispose of it? But if you look at the RTC as a solution, it’s good to know that it was fairly effective last time.

Word on the Street
The Fast Money traders take a look at today's top business stories.

I agree that this was a death spiral, says Pete Najarian. I don’t know what the answer is, but they needed to do something and they did. At least now, the market will take a pause. I believe it will stop the spiral.

Jeff Macke isn’t buying. He thinks the government is just throwing money at the problem. And then they’ll build an escalator to the moon, he exclaims.

What they should have done is suspend the ability of the ratings agencies to downgrade financials. For my money, that’s the better move.

I weep for the future, for my children and the free market as a whole, Macke concludes.

It could be better for the nation than the Louisiana purchase, counters Guy Adami. They could make a lot of money here.

If you’re looking for a play look at Greenhill, Lazard , and Jefferies. he says. Don’t chase them, but they could be the winners when all is said and done.




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Trader disclosure: On Sept 18, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders;Macke Owns (SDS), (WMT), (MSFT); Adami Owns (AGU), (BTU), (C), (GS), (MSFT), (NUE); Pete Najarian Owns (AAPL) And (AAPL) Collar; Pete Najarian Owns (ETFC); Pete Najarian Owns (MS) And (MS) Puts; Pete Najarian Owns (NOK) And Is Short (NOK) Calls; Pete Najarian Owns (RIMM) Call Spreads; Pete Najarian Owns (TSO) Call Spread; Pete Najarian Owns (WB) Put Spread; Pete Najarian Owns (WM) And (WM) Puts; Pete Najarian Owns (XLF) And (XLF) Puts; Finerman Owns (GS); Finerman's Firm Owns (MO), (MSFT), (NOK), (SUN), (TSO), (VLO); Finerman's Firm Owns (WFC) Puts; Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM), (COF)

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  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

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