Category Archives: Fast Money

Back on Christmas Eve of 2009, Obama's Treasury Dept. said it would lift the limits on what the federal government could provide in "emergency aid" to Fannie Mae and Freddie Mac - without seeking Congressional permission. 

Very few reporters noticed, except for The Washington Post's Zachary Goldfarb who reported the story on Christmas Day and CNBC CME Group reporter and tea party inspiration Rick Santelli, who later pleaded for the public to take notice. With that occurrence in mind, Santelli scoffed at Sen. Chris Dodd's, D-Conn., legislative proposal of financial system reform that did not include reforms on both Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE).

"You know, I can't believe, first of all - you said, may not be included. They are not going to be included," Santelli said on "Fast Money" March 12. "And I think to put a moniker of reform on something that doesn't include Freddie and Fannie is very disingenuous. And I think that to pass something - what I heard Mr. Dodd say, Sen. Dodd, was, you know, it's the 101st senator. In other words, you know, we'll pass anything we have to show that we're doing something, no matter if it's the right thing or not, you know, I'm not buying that again."

So how would Santelli solve the so-called Freddie Mac/Fannie Mae problem? He broke it down for viewers.

"Well, I think that I would break them up immediately and put them up for auction and privatize them or unwind it or officially nationalize them," Santelli said. "But what I wouldn't do is completely ignore them and then after Christmas Eve enable them to issue debt, they're issuing reference notes between them and FHA, they're guaranteeing mortgages. This is truly still reprehensible. I don't think the average person out there realizes that the game is afoot. It's the same crap game, just a different alley. "

"Fast Money" panelist Joe Terranova said Fannie and Freddie own or guarantee over 50 percent of all home mortgages and asked if the time was right to "privatize them, nationalize them, address the issue." According to Santelli, the time has been right.

"See, and what you asked is to me inherent in why they don't understand what caused the crisis and to pass anything is silly," Santelli said. "You know, if it isn't the right time, what is? And what you're really saying is who else would possibly guarantee these mortgages? Nobody in their right mind, so we have to keep them going. Think about what you're saying. It sounds ridiculous."

Santelli was skeptical that true reform would happen based on the federal government's track record with TARP and the stimulus.

"I've been ranting for a year," Santelli said. "You'd hope somebody would figure it out. I remember when Maria said they have to pass TARP. They passed it, took our money, and then says, ‘Oh we're not really going to buy toxic assets.' They passed the Recovery Act and said, ‘Shovel ready.' The shovel was probably 45 stories from the dirt and here we're getting the same story again."

President Obama continuously tries to portray himself as a friend to the little-man, middle class and small business. Hence his attacks on "fat cats" who "just don't get it," while labeling the extravagant bonuses as "obscene," and "the height of irresponsibility."

Meanwhile, members of his administration, in defending a sweeping small-business aid program Obama announced in his State of the Union, give reason to wonder if they really understand how to help small business. 

Among the administration's proposals for small businesses are a $5,000 tax credit to hire new workers, elimination of capital gains taxes, and new incentives to invest in plants and equipment. At the same time, however, the administration plans to raise taxes on "the wealthiest Americans."

Obama's chief economic adviser Larry Summers appeared Feb. 9 on the Fox Business Channel to discuss the administration's economic agenda and defended proposed rate-hikes for those making over $250,000. "Almost all economists who studied these things have that kind of view," he told Fox's Liz Claman.

Perplexed, Fox News contributor Gary B. Smith replied: "it's the biggest bunch of B.S. I ever heard ... this is such a political game. , Larry Summers thinks everyone is Rockefeller living in their Newport, Rhode Island mansion. These are guys that are starting businesses, investing. You can't give people business money to hire people, they have to have a reason for hiring these people and that's because they see sales increasing or costs decreasing. You can't just say ‘go hire these five people' because the businesses will go ‘What for? I don't have the demand!'"

Contributor Mike Norman also disagreed with Obama's economic plan, saying, "If you want to get money into the hands of most people, the fastest, you do something that has been proposed now since this whole crisis began - and that is a suspension or significant reduction in the payroll tax. That's where people get the most taken out; that's something like a trillion-dollars every year that goes to the federal government - that just goes nowhere," Norman said. "That would bring our economy back, but he's not for that."

Recently, the chief economic adviser of the White House also sat down for an interview on CNBC's Monday edition of "Fast Money." And in anticipation of a new jobs report, Larry Summer was ready to blame bad weather for current economic troubles.

During the interview with Karen Finerman, Larry Summers stressed that recent winter blizzards may very likely distort the February jobless figures that are coming out Friday:

"Who knows what the numbers are going to be," Summers told Finerman. "The blizzards that affected much of the country during the last month are likely to distort the statistics and in past blizzards those statistics have been distorted by a hundred to two-hundred thousand jobs."

[Summers chuckle]

"So it's going to be very important to know, very important to look past whatever the next figures are to gauge the underlying trends."

As the old cliché goes, you don't use a sledgehammer to crack a nut, but according to Rick Santelli, that's exactly what it appears the Obama administration is doing terms of financial regulation and fiscal discipline.

On CNBC's Feb. 2 broadcast of "Fast Money," host Melissa Lee proposed that taxing the wealthy is not the path to "economic prosperity and fiscal stability." Santelli, the network's CME Group floor reporter, agreed.

"Well, you're right," Santelli said. "But I also think you're going to see when the Bush tax cuts expire, a lot of middle class write-offs and exemptions and various tax benefits will also fall by the wayside. Not the least of which to mention, I have so many friends that work for the financial industry. And they've learned from the government, even if you only make $25,000 to $125,000 a year, one firm says if you leave to go into another job or whatever, anything outside retirement, they're going to keep 10-to-20 percent of the stock they took from you following the government's directives."

The outspoken CNBC correspondent said the approach, now referred to as "The Volcker Rule," after Paul Volcker, the former Federal Reserve Board chairman who's now a key economic advisor to the White House, is the wrong way to go.

"I don't know," Santelli continued, holding up an oversized gavel. "You know what? I don't think that this ought to be the tool that our government is using, whether it's health care reform or whether it's reform on regulations or in general to try to find money from those that work. This is not the tool. It should be a scalpel."

"Fast Money" panelist Karen Finerman asked Santelli what should be done - if not higher taxes and stricter rules. Santelli explained there was too much emphasis on action and not results in the young Obama presidency.

"I don't think that they can quit spending," Santelli said. "If you look at the big debate that was in one of the hearings today, I think it was [Sen. Judd] Gregg, he was yelling because basically, the current proposal is, ‘Hey, we didn't, you know, spend $30 billion here, let's use it for another jobs program.' How many times do we keep doing the same thing over and over, just because we're spending money. I'm from Chicago, we spend a boatload on education. Spending money isn't what you celebrate. It's results. We're not getting very good results."

The key according to Santelli would be to simplify the tax structure. As "Fast Money" panelist Guy Adami explained, corporation, like Intel (NASDAQ:INTC) have learned to game the system. And with a complicated tax code, the smarter firms will always figure out to find the loopholes.

"It is outrageous," Santelli replied. "Basically the tax code, I guess if you stack it up page to page, I'll be touching some of the lunar blemishes up there, but in the end, we need things more simple. I think that should be the lesson after the whole health care process that whether it's taxes and loopholes, these regulations Wall Street will run circles around it. But I told you, none of this is going to pass. Just the discussion about hedges with Mr. Volcker shows how complicated it is. Talk to anybody who trades commodities about the over-the-counter oil or grain trades that get scrubbed through because of hedging exemptions. Make things simple I guess is the answer."

A rising Dow Jones Industrial Average (DJIA) means better times are on the way, right? Not necessarily, according to CNBC CME floor reporter and tea party movement inspiration Rick Santelli.

Santelli made an appearance on CNBC's Nov. 6 "Fast Money," a show which the host, Melissa Lee, is skittish about a discussion that politics interferes with the market is a reality. Nonetheless, Santelli explained there so happens to be correlation between a rise in unemployment rates and the rise in the Dow Jones Industrial Average.

"[I] think we're building a stairway to heaven in Dow prices on the back of paper and I think that, you know it seems kind of dire to me that 8 percent - 8,000, 9 percent - 9,000, 10.2 - 10,000," Santelli said. "I shudder to think where the unemployment rate is going to be at 11 and 12,000 in the Dow."

Lee challenged Santelli on his premise and applied the conventional wisdom that stocks are forward-looking indicators and that unemployment is a lagging indicator. That's not the case, according to Santelli, who expressed his concern about the pending health care legislation being debated in the House of Representatives under the leadership of House Speaker Nancy Pelosi.

"Not anymore," Santelli replied. "How can it be? What are they going to do in Washington at midnight tomorrow? How can it possibly be forward looking? We don't know what they're going to do with our money - with trillions of dollars, one-sixth of the economy and that's one example."

But here's how the equation works as Santelli explained - as long as unemployment continues to go up, the Federal Reserve will be reluctant to raise interest rates. And that's a bet investors are going to take - that as long as monetary policy remains easy, investors will continue to fuel the market.

"That's the game - that's why stocks keep going up on an unemployment rate, where the unemployment rate is important to America and investors that are invested in the stock market can still profit. Hey - you know, the last three recessions - what size was Google or Amazon? You know, let's look at who used to hire and how recessions used to be. You know, GM hired hundreds of thousands of people. What were their market capitalizations? Look at Google - how many people do they have? Do you really see this changing?"