TheStreet.com's Jim Cramer says a do-nothing Fed signs the death certificate of the banks.

Time for the inflation hawks to recognize the stakes. Throughout the discussion as articulated in the papers and on TV, you hear of only two things with regard to the Fed, that the fundamentals are sound enough to stop cutting and that inflation worries command a shift to higher rates.

In the interest of understanding what has been happening in this market -- an unrelenting decline in all but the oil and fertilizer stocks since the Fed floated this stance -- you have to get your arms around the idea that this is it, an obituary, for all of the banks that need housing prices to increase and bad loans to decrease. Because despite the sound and quite cerebral approach the hawks are taking, unless we get a giant FHA bill out of Congress, you can pretty much be assured that most of the big banks in this country will be so radically under-reserved when they report that we might as well just give up on them.

How about that bill? It seems suddenly likely and it is important, I am not denying it. If we could get the FHA to have $300 billion in lending capacity and we agree that the FHA is basically going to have to take a beating, than you can make a case that we are only about a year away from a turn -- that was the tenor of the CSFB housing upgrade story yesterday, although it didn't rely on the FHA much at all in its prognostications.

(Amazingly, the FHA has taken a lead role, as the CSFB piece explains well, in bailing out the captive homebuilder loan operations by issuing exactly the kind of no-money-down junk that got us in trouble in the first place. It is pretty astoundingly stupid.)

But the FHA is no substitute for the reliquification that is needed to save Bank of America (NYSE: BAC) (Cramer's Take), WaMu (NYSE: WM) (Cramer's Take), Wachovia (NYSE: WB) (Cramer's Take) and Citigroup (NYSE: C) (Cramer's Take). If you were on their boards, you would be at the Fed, saying, "If you just give us 0.5% on the rates, we can invest that money at, say, 1.5% on the curve and rebuild our equity."

And that's the real cost of today's discussion. When the Fed says it is done, that closes the remaining door for banks to raise money. Now all they will have is the hope that there is still enough stupid value and sovereign money in the pipe to do more equity rounds.

Given the inflation is mostly oil- and ethanol-based, I always want to ask these inflation hawks what they think the impact will be on oil if we raise rates here, given that we are not the swing user of oil? I know what a cessation of rate cuts will mean to the banking system, do the hawks know what it will mean to oil-based inflation?

I know that WaMu and BAC and C and Wachovia have a far greater likelihood to go under if the Fed stops cutting, do they know what it will mean to corn-based inflation?

I keep waiting to hear what the hawks have in store for us if the Fed switches, because I have a real good idea what the bears will do with the banking stocks with this new stance.

When I talked yesterday with Erin Burnett -- who still thinks I am too gloomy about the banks -- I realized that it just might be too late and we have to contemplate a world where the big banks simply take on the role of Manufacturers Hanover and Chemical and Security Pacific and Valley National and Rainier and First Republic and M Corp. and all of the other banks that had to be subsumed.

If that's the case, we are most surely not done going down. We will get an oversold bounce as the hawks rejoice, and then we'll get an economy that, with the help of our worldwide partners who are also raising rates, ratchets down the market a quick 10%, not the 5% that I am looking for.

I know, no solace.

But it is what the hawks want. And today it looks like they are going to get their way.

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.