Cramer on BloggingStocks: Questions swirl around Lehman's capital raise

Posted Jun 9th 2008 9:00AM by Jim Cramer
Filed under: Market Matters, JPMorgan Chase (JPM), Bank of America (BAC), Merrill Lynch (MER), Countrywide Financial (CFC), Wachovia Corp (WB), Washington Mutual (WM), Lehman Br Holdings (LEH), Stocks to Buy, Stocks to Sell, Cramer on BloggingStocks

TheStreet.com's Jim Cramer says that with this bank going back to the well, there are too many questions to risk buying in this space.

Why doesn't Lehman (NYSE: LEH) (Cramer's Take) raise $15 billion? Or $20 billion. How about $30 billion?

Would it then not have to come back to the market? Maybe for $40 billion we could lose what has become a cancer on the market.

The question we all must ask this morning is how bad are the portfolios that these firms are stuck with, and how bad is every attempt to undo them? Where did they come from? Who put them into these bonds? Which clients dumped them on Lehman? Who allowed this? Have they been fired? Why did the firm exude any confidence? Why did it hold on to this stuff for so long? How undercapitalized was it really?

All of these things spring to mind because the previous capital raise, the preferred raise, clearly meant nothing. No more than the raises that Merrill (NYSE: MER) (Cramer's Take) has done and will no doubt have to do more of.

It's the denials that get me. Or the "soft denials," the ones that tell us, "Look, things are fine." Because that's all quicksand.

Here's the rub with this era. Everyone who has been in trouble stays in trouble. Bank of America (NYSE: BAC) (Cramer's Take), with its ludicrous buy of Countrywide (NYSE: CFC) (Cramer's Take), that could actually sink this great bank; Wachovia (NYSE: WB) (Cramer's Take); National City (NYSE: NCC) (Cramer's Take); Washington Mutual (NYSE: WM) (Cramer's Take). They are all still in need of capital. Because if you are a regulated business, you can't hedge this stuff properly and you need to raise capital, and no one wants these bonds -- whatever the heck's in there -- so more money needs to be raised.

We have lacked any transparency about what's in these portfolios. We don't know what JPMorgan (NYSE: JPM) (Cramer's Take) bought from Bear. We don't know what Lehman owns. 2006 California HELOC? Brokered loans from Novastar? Fremont General no-doc paper? How bad can it be? We don't have a clue.

We do know that there are $480 billion in losses written off and we are still nowhere, including Lehman.

So, these "fund raisings" mean nothing to me.

Here's the new rule of thumb I am using: If an institution needs capital, sell it. Let the dumb institutional and mutual fund chumps do the buying. I can't find a single one of these infusion situations that doesn't need more infusions. Why be a banking piñata?

Beats the heck out of me.

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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.

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