It is the insurers that seem to be ignored -- still -- as the Achilles' heel that will make it so that so many institutions have to regard junk as nonperforming. The perfect soggy chain of Moody's and Standard & Poor's rating these firms in turn gives Moody's and S&P the right to rate so many stupid structured products as AAA and AA, and that holds the linchpin to the next move down.

Of course, Washington Mutual (NYSE: WM) (Cramer's Take) and Countrywide (NYSE: CFC) (Cramer's Take) would suffer greatly from these insurers' downgrades as it would virtually shut off any ability to grow out of the problems or take advantage of the giant spreads that are developing.

Somehow I think this whole fragile scenario is just too opaque for the Fed to understand.

I hate ever accusing the Fed of stupidity. That's the type of thing that makes people feel like you're a gadfly. But stocks don't lie in unison, and this group is being taken down like a whole closet of cheap suits. Meanwhile, Indymac (NYSE: IMB) (Cramer's Take) fights for its life and Standard Pacific (NYSE: SPF) (Cramer's Take) is on life support and the Lennar (NYSE: LEN) (Cramer's Take) crowd is acting as if the worst isn't so bad after all.

This whole "we are fine" nonsense bothers me immensely because it is so overlooked and so misunderstood. And that's because it requires a giant look through so many pieces of paper and so many 10Qs.

But go ahead. For example, look at the 10Qs from E*Trade and CIT (NYSE: CIT) (Cramer's Take) to see what I'm talking about. Although the former is a little opaque, the latter really breaks things down for all to see.

Put simply, the defaults in home equity are off the charts, particularly in Florida and California. Yet the apologists for housing continue unabated.

Yeah, we are fine -- real fine!

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO.At the time of publication, Cramer had no positions in any of the stocks mentioned in this post.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider ACA Capital, Security Capital and Standard Pacific to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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