If the CDO don’t fit, you must acquit. That’s the chatter on Wall Street as the criminal probe into financial wrong-doing goes wide.
On Thursday, New York attorney general Andrew Cuomo launched an investigation into eight banks to determine whether they misled ratings agencies about mortgage securities.
His office is investigating Goldman Sachs, Morgan Stanley, UBS , Citigroup , Credit Suisse, Deutsche Bank, Credit Agricole and Merrill Lynch, which is now part of Bank of America.
Meanwhile, separately the WSJ says the SEC has launched other probes, which could result in additional civil suits.
These developments generated a strong headwind for the bulls; selling accelerated into the close with the Dow ending lower by triple digits. Should you hold your breath and buy the weakness?
Strategy Session with the Fast Money traders
With so many firms now facing charges a global settlement can’t be far behind, muses Gary Kaminksy. As far as what's gone on with the CDOs I think we see a big fine and then it will all be over.
I’m long Goldman calls, adds Karen Finerman. I agree that the banks pay a fine and we all move on. I think it's similar to the Spitzer settlement which ended well.
But even with settlement, I would not own the banks here, says Tim Seymour. Just looking at the action in the euro, I have to remind myself that all is not right in the world.
All is defintely not right with the world, adds Guy Adami. If the criminal probe was the only factor weighing on the market I'd agree with Karen and Gary. But China is slowing down and Cisco earnings were cautious.
I wouldn’t get so giddy about a settlement just yet. I think these banks get whacked with more headlines as we go through the year, counters Chris Whalen of Institutional Analystics. The politicians love this and they're going to milk it into November. I'd get used to it.