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Why Rally Is "Bad" For Bailout Backers

We have really fallen down the rabbit hole today. For proponents of a bill, a notable rally pre-open is not welcome news.

Traders are surprisingly optimistic that some kind of bill can be passed by the House this week. They base this belief on the idea that the bill was only 11 votes short and the Mother of All Arm Twistings will be applied to a couple dozen Congress people in the next few days.

Proponents of a bill want a DOWN open, and they want the markets closing DOWN today, to emphasize the magnitude of the crisis. A positive close would only make many feel there is less sense of urgency.

The rise in futures is welcome by those hostile to the bill, who argue that the market should go it alone. To purists, the collapse of bank prices simply means that more and more of the bad news is factored into the market.

The odd thing is that both camps agree that two events need to occur: 1) mass purchases of bad debts, and 2) large-scale capital injections into individual banks.

Elsewhere:

1) A number of beaten-up regional banks, like Regions Financial(up 21 percent), BB&T (up 11 percent) trading up this morning, as are a few larger financials like CIT, JP Morgan, and Morgan Stanley.

2) Genworth Financial said they are examing strategic alternatives regarding their mortgage insurance division, including a possible spinoff. That division has been at the heart of the company's share selloff. Up 26 percent pre-open.

3) The Dow dropped over 200 points in the closing minutes, and it could have been a lot uglier. There was very little buying interest as a wave of sell orders came in, so specialist firms on the floor were active buyers, as they were supposed to be. I heard one specialist firm committed $175 million in capital.

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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