Drastic times call for drastic measures and some of those measures were mentioned on CNBC immediately after the Dow Jones Industrial Average (DJIA [1]) took a late session nose-dive to finish down 679 points [2], or roughly 7 percent.
CNBC ‘Fast Money’ host Dylan Ratigan suggested some of those measures be punitive. He said traders who he deemed “cheaters” – taking risks they couldn’t afford – should be punished or the market would never fully regain confidence and attract investors again.
“When you see people who are able to take hundreds of millions of dollars in bonuses by risking the system – at the time they took the risk, knowing they could never afford to pay the trillion dollars in losses – if in fact the chickens came home to roost, which they have – until we punish the cheaters, this market will not have confidence,” Ratigan said. “We need a perp walk.” Jon Najarian, editor of ChangeWave Options Trader [3] and “Fast Money” regular, responded by saying “That’s right.”
Ratigan, who also co-hosts CNBC’s “The Call” and “Closing
“The cheating in this case comes as a result of both individuals and banks that had small amounts of money and either borrowed a lot of it on Main Street that they couldn’t afford to pay back or banks that had small amounts of money and then lent a lot of it – and then here’s where the cheating comes in,” Ratigan said. “If you lend a lot of money on a little bit of money and you know at the time you make those loans or if you sell insurance on something – at the time you sell it, you know can never pay the claims if they come in – you are not selling anything, you are stealing money.”
He said it all goes back to bonuses that were paid out which promoted risky behavior and encouraged managers to take chances, which would eventually leave the taxpayer footing the bill.
“If you bonus yourself based on lending lots of money, taking lots of risks that you know you cannot pay, that you know if it goes the other way, which it has, that the risk you have taken must be taken down by the American taxpayer, not you – I ask you quite simply, what entitles you to take that bonus?” Ratigan said.
Other measures that were mentioned during the broadcasts were the prospects of the federal government buying up equities to encourage buying in the market and even a bank holiday to cool things off.
“In essence, we’re getting more signals from the White House and Treasury, that in essence, this notion of taking stakes or buying stakes in banks is really moving up in the short list of options as Treasury goes about the business of trying to figure out how to implement this $700 billion rescue plan,” Hampton Pearson, CNBC Washington reporter told “Fast Money.”
A trading holiday was proposed because it could be done in conjunction with Columbus Day, which the market has relatively light trading volume due to banks being closed.
“[P]erhaps it’s not a bad idea,” Dennis Gartman, author of The Gartman Letter [4] said on “Fast Money.” “We do in fact have Columbus Day coming up and the amount of trading – although the markets aren’t closed – the amount of trading will be greatly reduced because the banks will be ostensibly taken out of the market for a day or two. We’re going to have at least a weekend coming up. Everybody can go home and take a deep breath.”