Cramer on BloggingStocks: Einhorn gutted Lehman, and that's OK

I have a TV show, and I cannot short and I cannot trade. So I am an anomaly. It is not right for me to abuse my power or position. And I can never own or short stocks personally for a profit because the credibility of my writings and my show would be destroyed.

But I saw something akin to what I am describing yesterday with a guest, David Einhorn, taking down Lehman Brothers. And I have to say that I could see why he did it, and while I think it needs to be debated here in these pages whether he is right to be able to do it, I support his outspokenness and don't want it crimped. He's right to do what he did even as painful as it must be to work at Lehman or be long it.

First, guys come on all of the time, everywhere, and tell you they love a stock. Sometimes they load the boat up before. Nobody checks to see if they actually traded it after. I used to bring my trade sheets with me on to TV and show what I did after I was on the show, too. I thought it was right to do. Funny, of course, that I was and will remain, I believe, the only one ever investigated for this stuff, so it is ironic that I was the one who actually showed the records. But let's leave that out. People hype stocks all of the time and profit from their hype. We consider that right and fair, at least as far as I have seen.

So I cannot say that if you get short and blast a stock down with your comments that it is wrong. I once indicated that I would short a stock; it went down hard, and I was investigated for shorting it without disclosure. I hadn't, I hadn't traded it at all, but at the time the SEC swung into action immediately to see if I had shorted it. The investigation was dropped when it was found that I hadn't traded it, although in the interim it did go bankrupt. A second time I came on, again as a guest like in the former example, and said I thought Enron was corrupt, when it was at $35 and should be investigated by the Justice Department. Again, I got the inquiry, and again, because I wasn't short it, the inquiry was dropped. I don't think I should have been investigated for either. In fact, I found it outrageous.

Now those instances seem so tame. We have hedge fund managers taking short positions and killing stocks and the government doesn't care. You could argue that in my cases the government wanted to find out whether I shorted the stocks and hid it, but I said when I blasted them that I wasn't short.

But I truly wonder if I had said I was short and I had crushed them whether I would have been in the government's crosshairs back then.

I must admit to being jealous of Einhorn and his Lehman short. I know I could never get away with it. But I am sympathetic, as I said, because of the symmetry of being able to hype and sell, so what if he bashes and covers or doesn't? Two sides of the same coin.

What I think I worry about is the notion of causing a financing. You are not material when you hype. You do allow insiders to sell higher than you should, but you are not material to the company's finances. When you take apart an MBIA (NYSE: MBI) (Cramer's Take) or a Bear Stearns or a Lehman, you are material. It's a big difference, and that is a legitimately debatable issue. You can cause a literal run on the bank.

You know what? After all my wrestling, I think that's just too bad. Companies need to get ready for this kind of bashing and take advantage of the artificial decline created by Einhorn's words. They have to view it as an opportunity. If they can't, they are doing something wrong as a business and the short-seller is right.

So, my conclusion? If you are going to let someone hype, you have to let someone bash. If you are going to allow someone to sell into his hype and get away with it, you have to be able to allow someone to buy into his bashing as long as he reasonably believes it is true, which I am sure Einhorn does.

cannot call for an investigation of a short-seller cracking Lehman, just as I didn't think it was right that I was investigated for knocking two companies that I thought would go bankrupt that did -- even if it could trigger a financing. I do not think it matters that he had skin in the game. He disclosed. That's all the SEC should care about, and he did the right thing.

I think the bottom line is that companies that need to rely on the kindness of others for their funding better get ready for this new world. The hedge funds who are short are speaking out. If they are wrong, punish them and take advantage of the artificial decline by buying. You can't put that genie back in the bottle.

Random musings: I am wondering whether MBIA and Ambac (NYSE: ABK) (Cramer's Take) are so low that they could be interesting call options on a turnaround. Too many people interested in keeping them afloat. Most calls go to zero, so keep that in mind.


RELATED LINKS:

• Lehman Shares Jump Again
• Lehman Trouble: Einhorn Called It

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 the stocks mentioned.