Bank stocks down again
Industry in wait and see mode as Senate panel ends hearing on proposed $700 billion bailout.
NEW YORK (CNNMoney.com) -- Shares of most large banks and finance firms slumped Tuesday as the Senate Banking Committee's hearing on the $700 billion Wall Street bailout came to an end without alleviating investor concerns.
Dismayed investors are still throwing a "hissy fit" that the deal wasn't completed when they came into work Monday morning, said Matt McCormick, portfolio manager with Bahl & Gaynor Investment Counsel, a money management firm.
"Wall Street clearly wants a deal done yesterday, regardless of what's actually in the deal," said McCormick. "They don't really care about what's in the details. They don't care about discussing the long-term effects on the economy. They just want it done."
McCormick added, "As the deal changes hourly, nobody knows what the rules are."
The S&P Banking Index was down 2% in late afternoon trading, led by losses in regional banks Wachovia (WB, Fortune 500) and Wells Fargo (WFC, Fortune 500) and battered savings and loan Washington Mutual (WM, Fortune 500).
Shares of top banks JPMorgan Chase (JPM, Fortune 500), ,Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500) and investment bank Goldman Sachs (GS, Fortune 500) also were trading lower.
But Goldman rival Morgan Stanley (MS, Fortune 500) bucked the downward trend and was up 2%. The gains came one day after Morgan Stanley agreed to sell up to one-fifth of its company to Mitsubishi UFJ Financial Group, one of Japan's largest banks.
Brad Hintz, analyst for Sanford C. Bernstein, said that most bank stocks were down due to a combination of fears about further disruption in the credit markets as well as worries that the government may not approve a bank bailout.
Politicians grilled Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke about the bailout Tuesday.
Paulson said the bailout is necessary for "the very health of the economy." He said it should be big enough to have "maximum impact and restore market confidence" and it should also have transparency and oversight.
Bernanke also spoke in favor of the bailout: "We believe that strong and timely action is urgently needed to stabilize our economy."
Proponents of the bailout believe that it is necessary in order to save the economy. But others believe it is too expensive and baseless.
Oppenheimer analyst Meredith Whitney, one of the most influential banking analysts on Wall Street, said in a report published Tuesday that the bailout was too late to save the credit and lending markets.
"A virtual suction of liquidity has occurred in the credit and lending markets, and consumer and corporate credit is already showing the effects," Whitney said.
"What started last summer has accelerated and intensified so much so that we believe any government bailout plan has little hope of improving core fundamentals over the near and medium term," she added. 
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