Gov't Buying Banks - Should You?

As we’ve been telling you stocks closed with their best 5 days of gains since 1933. And financials led the way with Citigroup making sizable gains.

In fact, Citi has been performing all week, after the Treasury Department, Federal Reserve and the FDIC announced a plan to help the banking goliath avoid the fate of other financial firms felled by the ongoing credit crisis.

The Treasury Department will provide Citi with an additional $20 billion, on top of an earlier investment of $25 billion. That cash will come from the government's $700 billion bank investment program aimed at providing relief for banks and in an effort to spur lending amid the economic downturn.

The Treasury and FDIC will also help guarantee potential losses on up to $306 billion of risky loans and securities backed by mortgages held by Citi. Under the agreement, Citi will assume the first $29 billion in losses on the assets. After that, the government will absorb 90 percent of the remaining losses, with Citi shouldering the other 10 percent.

Is there a play here?

I like the banks particularly Citigroup says JJ Kinahan, Chief Derivatives Strategist, Thinkorswim.com. Honestly, I like them more than the automakers because they have a deposit base.

People are beginning to save money again, adds Dennis Gartman. Regional banks might be worth a look.

The government deciding what’s too big too fail is a statement that our grandchildren will find laughable, snickers Jeff Macke.


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Trader disclosure: On Nov. 28, 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 (MSFT), (UUP), (GM), (TM), (WMT); Kinahan Owns (CL), (GM), (HD), (JCP), (WFC), (XLF), (YHOO), (AAPL); Dennis Gartman Owns (AAPL); Gartman Owns a Natural Gas Trust; Dennis Gartman Is Short (KSS); Terranova Is Long (DIS)

Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO: rtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)

Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.: Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (BIG), (CLB), (DLR), (EPR), (EXR), (MAC), (SLB), (SKT), (UA), (IGE), (DBC), (DBV); Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights; Virtus Investment Partners Owns More Than 1% Of Shares Of Essex Property Trust Inc.; Virtus Investment Partners Owns More Than 1% Of Shares Of Corporate Office Properties Trust SBI MD

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