The issue of clawbacks surfaced on CNBC's "Fast Money" TV show Thursday after President Barack Obama lashed out at banking executives for giving themselves $20 billion in bonuses at a time when their industry is in the midst of a huge government bailout.
Dylan Ratigan, the moderator of the show, showed footage of Obama's comments as well as that of Sen. Christopher Dodd, D-Conn., who called the bonuses "unacceptable" and wanted to figure out a way for the government to reclaim some of the money. Pete Najarian agreed with Dodd, asserting a clawback is exactly the kind of "sentiment changer" needed to restore public confidence. He said it is not only a matter of "just dumping bad assets into a good-bad bank" but also pulling some assets from these institutions to make them pay for their misdeeds. Jeff Macke, though, reminded the panel that any attempt to take the bonuses is not getting at the heart of the problem: dealing with the bad assets. Ratigan disagreed, arguing that the clawbacks are necessary to restore confidence in a financial system that has been asking the taxpayer to make extraordinary sacrifices. Ratigan shifted the discussion to Internet and digital names that continue to impress Wall Street, which saw most of its gains this week erased in today's trading session. The Dow Jones Industrial Average sank 226.44, or 2.7%, to 8,149.01, while the S&P 500 gave up 28.95, or 3.31%, to 845.44. The Nasdaq fell 50.50, or 3.24%, to 1,507.84.
Amazon.com ( AMZN - Get Report) was up 13% in after-hours trading, after its earnings beat expectations. Guy Adami said the latest results show the company is being run better, noting its operating margins in the fourth quarter were up 4.1% over the previous quarter, compared with a 3.6% rise in the third quarter. Najarian noted unusual bullish options activity in Netflix ( NFLX - Get Report), which saw a 25% in subscriptions in the past quarter. "People are staying at home and downloading movies," he said. The rise in gold above $900 today also peaked the interest of the panel. Najarian said he was seeing unusually active options activity in Market Vectors Gold Miners ETF ( GDX - Get Report). Ratigan brought in Dennis Gartman to comment on the rise in gold. Gartman said the rise is occurring because of the "risk to all currencies." "Gold has become the second reserve currency (after the dollar)," he said. Gartman said one bright spot in the maligned banking industry are small and regional banks. He said these banks are doing well because they don't have toxic assets and are making a "ton of money" from taking in demand deposits and buying two-year government securities at low rates. Ratigan asked Mark Zandi, chief economist for Moodys.com, to comment on Obama's stimulus. He told the panel that the stimulus needs both spending and tax cut components. He said spending offers the "biggest bang for the buck" in creating jobs, while tax cuts will get money into the system quickly this year. Zandi said the government can afford a much larger stimulus that the one just passed by the House. That's because government debt is currently 40% of GDP, which is about average during the post-World War II period, he explained.
Debt can rise to 60% of GDP in the next two years and still be manageable at low interest rates, he said. Zandi reiterated the need for government to take fast, aggressive steps to tackle the nation's economic problems. With the exception of the much criticized $68 billion deal by Pfizer ( PFE - Get Report), the drug and biotech sectors have held up well in the markets. Mike Huckman, a CNBC reporter, commented on Pfizer's stock, which is down 12% this week. He said investors don't like the deal because of the dividend cut, stock dilution, and assumption of $22.5 billion in debt. Huckman said investors are also troubled by the lack of visible growth in earnings and the company's inability to come up with something to fill the pipeline when it loses its blockbuster Liptor drug in a couple of years. Huckman also said there's "chatter" that Pfizer might have to "divest" a Wyeth drug that is in the mid- to late-stage of development for Alzheimer's. The reporter commented on two companies getting a lot of buzz. He said Sequenom ( SQNM) could be on to something big with a test it is developing to detect Down Syndrome in the fetus of pregnant women. Huckman offered one caveat to viewers. He told them to wait for this information, which came from public relations releases, to be published in a peer review journal or presented at a scientific conference. Huckman said Amylin Pharmaceuticals ( AMLN) was up today, after Carl Icahn upped his stake in the company.
Finally, Ratigan invited Barry Ritholtz, CEO of Fusion IQ, to comment on his idea of a tougher approach than the bad bank plan under consideration by the Obama administration. Ritholz favors a market approach that would call for the government to take over the troubled banks temporarily to wipe out their debt, wipe out the shareholders and get rid of management before spinning them out as "clean, well-capitalized" banks that can start lending again. "Check out
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