The Treasury’s decision to back away from using its $700 billion bailout to mop up sour mortgages created extensive uncertainty in the market on Wednesday.
When Congress approved the $700 billion bailout plan last month, the stated purpose was to purchase toxic assets, especially mortgage-backed securities, from banks.
Now, Treasury Secretary Henry Paulson says that the administration is looking at a major expansion of the program into the markets that provide support for credit-card debt, auto loans and student loans.
“I hate the fact that the rules keep changing. I couldn’t understand what Paulson said on Wednesday, but I think it translates into ‘I don’t know what’s going on,’" says an annoyed Jeff Macke
“I wish Paulson would say nothing at all, rather than say very abstract things like I want to address consumer issues,” muses Karen Finerman.
"Investors are confused. We started going down the route that we were going to buy the bad assets. Now we're going to make everything a bank holding company," said Craig Hester, CEO of Hester Capital Management in Austin, Texas.
If you're one of those investors who is confused over changes in the TARP program CNBC's Steve Liesman thinks you could be missing something vital.
"The treasury is now going to get into the market for asset backed consumer loans,” he tells the traders. "Essentially they’re going to have another 'Fed' that is going to buy bundled auto loans or bundled credit card loans. So I think the money is still out there, it just might not be going out as quickly as once thought.”
Investors sold off financial stocks amid questions about what the impact of the new plan will be on the sector. Among the casualties was Citigroup, which fell below $10 for the first time in its history.
In fact, a lot of banks have sold off since the bailout was first implemented.
Performance of Financials Since TARP
(Percentage Change October 3rd – Today
Wells Fargo -22%
Morgan Stanley -48%
Goldman Sachs -50%
Merrill Lynch -51%
Bank of America -53%
I say hats off to Meredith Whitney from Oppenheimer, says Pete Najarian. She told Maria Bartiromo that Citigroup could trade at the single digits. The one to keep an eye on now is American Express . The credit card company slipped after the Wall Street Journal reported that the company is seeking about $3.5 billion in government aid, he adds
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Trader disclosure: On Nov.12, 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), (UUP), (WMT), (MSFT); Najarian Owns (AXP) Put Spread; Najarian Owns (CHK) Call Spread; Najarian Owns (PTIE) Calls; Seymour Owns (AAPL), (BAC), (F), (MER); Seygem Assset Management Is Short (RSX); Finerman's Firm Owns (OIH) Puts; Finerman's Firm Owns (MSFT); Finerman's Firm Is Short (USO), (VNO), (IYR), (IJR), (MDY), (SPY), (IWM), (COF), (BBT,), (GNK); GE Is The Parent Company Of CNBC