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TheStreet.com's Jim Cramer says the common would be crushed on a government takeover, but everything else would be saved.The most important positive that must occur in this economy is for housing to stop going down. It is even more important than oil going down, because it cuts to the core of consumer confidence and credit.
House prices are coming down, but that's not enough. We also need lower mortgage rates, and the spread between the mortgage rates and Treasuries is so high that it's hard to make case that you are getting any sort of bargain at all on the money you are trying to borrow. It should be a great time to buy a house -- no demand, plenty of supply -- but mortgage rates are just too high.
But we all know how they would go down and go down big -- if Treasury took over Fannie (NYSE: FNM) (Cramer's Take) and Freddie (NYSE: FRE) (Cramer's Take) this weekend. If you back off Fannie's and Freddie's bonds, you get a decline in rates of mammoth proportions. It might make sense to buy a house simply because the rates would be so low.
I believe that's one of the reasons Wells Fargo (NYSE: WFC) (Cramer's Take) and JPMorgan (NYSE: JPM) (Cramer's Take) rallied yesterday. The possibility of the long national housing price depreciation ending-- with the congressional housing legislation, the decline in housing starts, the tax credit for buying, the 30% to 40% declines in many markets and now an end to the Fannie/Freddie chaos -- could be in our grasp.
Sure, the common-stock shareholders would be crushed. But if they make the bond holders whole -- and that's all, but that must happen -- you are going to see good things occur, not bad.
It's time people started thinking that way.
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RELATED LINKS:
Cramer: The Only Real Future for Fannie, Freddie
Fannie and Freddie Test Their 25-Year Lows
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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 was long JPMorgan.
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