Nationalization fears rattled the bank stocks Friday as the markets continued to sink.
Dow Jones Industrial Average
fell 100.28, or 1.34%, to 7,365.67, while the
lost 8.89, or 1.14%, to 770.05. The
dipped 1.59, or 0.11%, to 1,441.23.
Dylan Ratigan, the moderator of
's "Fast Money" TV show, said the banks were murdered by the widespread speculation of nationalization and other policy moves from the Obama administration.
Joe Terranova said the focus is finally on getting the banks to own up and recognize their losses. "We're focusing finally on that critical issue that has been with us for the past six months," he said.
Karen Finerman said nationalization fears have been hammering the equity of
Bank of America
to $2.65 a share.
Finerman, who owns the bank's preferred shares, said the administration's attempt to temper the talk about nationalization by saying it is still for a private-sector banking system bodes well for the preferred stock. And she said the preferred shares will go a lot higher if the bank goes through with plans to pay dividends in March.
Ratigan raised the question about the meaning of nationalization. He wondered whether it means government control and liquidation, or equity obliteration, or the obliteration of preferred shareholders and bondholders.
Terranova speculated whether it would be wise for the administration to give the banks the money they need without getting them to recognize their losses.
Finerman told Terranova that the situation isn't so clear cut. She said a forced liquidation of the assets isn't necessarily the right thing to do because the banks could still recoup some of their losses in the bad assets over time.
Guy Adami said the resolution of the toxic asset problem, though painful, would put a bottom to the equities market.
Tim Seymour noted the global nature of the banking crisis, saying Western European countries are only beginning to deal with the banking issues that the U.S. has been dealing with for some time.
Ratigan brought in Joe Durant, CEO of United Capital Financial Partners, to comment on the banking crisis. He said that if this problem isn't fixed, no stimulus in the world will help the economy recover.
Durant said the banks are in a fix because they don't have the capital structure to write off the $1 trillion to $2 trillion worth of bad loans that remain. He said there are only two ways to deal with the situation: nationalize the banks or create a market for the bad assets.
He said a clean approach would be for the government to step in and pick up the bad assets and then "make the banks pay back any difference between what the government pays and what ends up getting realized in the underlying notes."
Yves Smith, of www.nakedcapitalism.com, said the notion of nationalization isn't as far-fetched as it seems. She said the FDIC already has been doing that on a small scale by taking over smaller troubled banks for a few days. She said the FDIC would have to add staff and do much more planning if they were to nationalize any of the big banks.
Ratigan shifted the discussion to gold, which passed $1,000 an ounce today and was up 6.4% for the week. Terranova said gold will continue to rise until there is a resolution of the banking crisis.
Seymour said the rush to gold is about the "limited amount of gold in the world and people wanting to own it for that reason."
Jon Najarian said this is an especially good time for the gold mining stocks such as
. "Anything over $900 is fantastic for the miners," he said.
That's because the miners are predicting costs will between $400 to $440 per ounce in 2009, he explained.
Najarian said he doesn't think gold will suffer if the Treasury Department comes up with a functional bank rescue plan. Indeed, he thinks it could go as high as $1,100 in the short term.
Ratigan asked the panelists to briefly comment on the global recession. Seymour said the problems of Japan, where the Nikkei has sunk to 2003 levels, and Western Europe have been taking oil futures lower.
Terranova said the problems are especially acute in Mexico, where credit default swaps have risen above those in Brazil for the first time since 2001. He said the peso is getting annihilated and the country is being torn apart by an ugly drug trafficking war.
Ratigan asked the panel for some bargain retail stocks. Finerman said she likes
, which she says will benefit from the stimulus and has a good balance sheet and cash.
Seymour mentioned two stocks in China:
Green Mountain Coffee Roasters
. And Adami liked
for its valuation and balance sheet.
Ratigan asked Finerman to talk about what shareholders are doing to curb excessive executive compensation packages. Finerman said her favorite is the so-called "golden coffin" in which CEOs get benefits after they die.
In one instance, she said, a CEO of the
( SGR) would receive $17 million for abiding with a non-compete clause.
Finerman acknowledged the difficulties for shareholders to make any headway to curb these practices. Terranova blamed the board of directors for allowing these practices to go on, and Seymour said they occur because shareholders generally are very passive and don't know that much about corporate governance.
In the final trades, Terranova liked
; Finerman liked the L preferred shares of
; and Seymour told investors to take profits in
SPDR Gold Shares
iShares Silver Trust
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