'Fast Money' Recap: I SPY

The trading panel says that when the short ban is lifted, the S&P 500 will pop.
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Dylan Ratigan hosted CNBC's "Fast Money" Friday night. He kicked off the show with a discussion of the proposed bailout of the housing and banking system. Joe Terranova told viewers to forget about the bailout. "I bought the SPDR Trust (SPY) - Get Report on Wednesday, because the short-sellers are piling in since they can't short the financial stocks," he said.

Terranova says when the short ban comes off on Oct. 2, the

S&P 500

will pop. Tim Seymour said he loved how the S&P 500 traded today in the face of bad news. "Technically, we have room to run here, past 1220 or maybe up to 1260," he added. Jeff Macke says he doesn't want to be long this market because the regulators are making up rules as we go along. Karen Finerman said she really didn't do a lot today in the markets.

Republican Adam Putnam of Florida joined the traders to discuss the bailout plan. He said negotiations are ongoing and said there is some momentum toward a hybrid of what Paulson proposed and what the Republicans are proposing. He said the goal is to have a completed deal before the markets open on Monday. "The core principles of the deal will be: taxpayers will benefit from the upside of the assets, more accountability and oversight from Congress, no golden parachutes for executives and doing more for Main Street."

Andrew Ross Sorkin, a reporter for the

New York Times

joined the traders to discuss breaking news that

Wachovia

(WB) - Get Report

is in merger talks with Spain's

Banco Santander

(STD)

,

Wells Fargo

(WFC) - Get Report

and

Citigroup

(C) - Get Report

.

Sorkin said Wachovia is worried that if a bailout bill doesn't happen, it will have to start looking for alternatives. "Wachovia wanted to know who was around the hoop this weekend in case things started to look like things weren't going the right way. In an ideal world, Wachovia CEO Bob Steel would love keep the good stuff and hope the bill bails out the bad stuff," he added.

Ratigan asked Sorkin if any transaction would result in the loss of Wachovia's equity. Sorkin says he doesn't want to cause a run on the stock and said the firm is well-capitalized at this moment. "The banks will keep falling, so buckle up," Macke added.

Ratigan told viewers that he saw a huge crowd around the post for

JPMorgan Chase

(JPM) - Get Report

on the

NYSE

, buying the stock. Finerman says the money is flowing into JPMorgan. Macke advised viewers to sell into the 10% rally in JPM.

Free Market Solutions

Jon Najarian joined the traders to discuss some market-based solutions for the bailout plan. Najarian says a system exists right now that we can use to get a price discovery system for mortgage-backed securities. "The problem here isn't just leverage, its transparency and the fact that mortgage-based securities weren't marked-to-market until the eleventh hour," he said. He says if the mortgage-backed securities were brought to an exchange, we would have a continuous marked-to-market process, the

Federal Reserve

could be a clearing firm, and we could unify the amount of risk we have around the world.

Ron Kruszewski, the CEO of Stifel Financial joined the traders to discuss the bailout plan. He said the bailout is a restructuring and not a bailout because everyone was involved in this. "As people deleverage coupled with the fact that financial institutions will now become bank holdings companie, we will be better able to compete," he added. He pointed out that on average Stifel leverages three-to-one and has averaged an 18% return on equity. "Our industry is going to shrink because we will not have the leverage we had before," he said.

Bailout Progress

Democrat Chuck Schumer of New York joined the traders to discuss the progress of the bailout. He said right now Congress is at a bit of an impasse. "The Democrats have an offer to the House Republicans that they wouldn't object to putting their insurance provision into the packages as an option," he said.

He says the Democrats don't believe the insurance provision will work. "The problem is the government will have a downside and no upside, plus it's very difficult to actually accomplish," he added. However, he says that if it would bring the House Republicans to the table, they are willing to put it into the package.

This article was written by a staff member of TheStreet.com.