TheStreet.com's Jim Cramer says it doesn't 'solve everything.' No one is saying it does. The biggest canard of all: "This is not going to be a cure-all, nor will it solve the 'real problems' of the U.S. economy." Why is it a canard?
Because no one -- I repeat, no one -- is saying it is. Not even the biggest bulls.
This bailout of Fannie (NYSE: FNM) (Cramer's Take) and Freddie (NYSE: FRE) (Cramer's Take) is a piece of the puzzle that is meant to stop house price depreciation. It is one of the major pieces. Mortgage rates are being called down big this morning, big, with some mortgage brokers thinking we will lop a full percentage point off of rates. In case you think they are biased, these people had been forecasting a big gain in rates.
What's driving me crazy here is the falseness of the critics. They are all assuming that things won't be happy. It is about being happier.
Let's take Bank of America (NYSE: BAC) (Cramer's Take) and Wells Fargo (NYSE: WFC) (Cramer's Take). These changes are huge for them. If you owned them, you are going to make a lot of money. Why? Because the competition just got diminished, and the company that was making them pay more for money is gone.
No, that doesn't cure their bad loans. It does make it better!
How about the option ARMs exposure of a Downey (NYSE: DSL) (Cramer's Take) or a Washington Mutual (NYSE: WM) (Cramer's Take)? Not much. Those are failed institutions with big deposit bases. Someone will buy them, but they are part of the problem that won't go away, because those home loans are 100% loan to value, so there is no equity in homes. Many of those people will lose their homes, but if Treasury/FNM/FRE gets those loans, they can give them a 20% mortgage haircut which might be enough to cover the decline in some parts of the country.
The most important change: We had seven dying institutions -- AIG (NYSE: AIG) (Cramer's Take), Ford (NYSE: F) (Cramer's Take), GM (NYSE: GM) (Cramer's Take), Washington Mutual, Citigroup (NYSE: C) (Cramer's Take), FNM/FRE and Lehman (NYSE: LEH) (Cramer's Take). The prospects of LEH or AIG to do a Merrill (NYSE: MER) (Cramer's Take) deal is better than before. That would leave just a handful that need bailing or closing, and you know that GM and Ford will not be closed -- they are too big to fail. Again, that's better than what it was.
That's the win.
Random musings: Bulls, bears and pigs -- the pigs who stayed short Ambac (NYSE: ABK) (Cramer's Take) and MBIA (NYSE: MBI) (Cramer's Take), amazing. ... Possible big winner here: HSBC (NYSE: HBC) (Cramer's Take) -- they can take over WaMu when that company can't raise the cash.
---------------------
RELATED LINKS:
Market Springs to Life on Fannie, Freddie News
Time to Delist Fannie and Freddie
---------------------
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.
Closing Bell: Economic Catapult for Thanksgiving & Black Friday (WMT, TGT, GRMN, GOOG, MSFT)
Deere up on Q4 earnings performance
Reid Hoffman: LinkedIn will go public (at some point)
Reader Comments (Page 1 of 1)
9-08-2008 @ 2:20PM
Herbert C. Haber said...
I am furious that my tax dollars are going to be used to aid and assist the stockholders of Bank of America and other companies which greedily invested in mortgage loans they knew were risky. What they were attempting to do was to get rich making poor-risk loans to unworthy real estate buyers.
Part of being an entrepreneur in a free society is having the right to go broke when you get too greedy. Investors who took unjustified risks will never learn proper self-control if the federal governrment continues to bail them out when they get in trouble.
9-08-2008 @ 3:59PM
Brian said...
Ok Fannie and Freddie are now stablized. The market is up 274. Wachovia is up 12%. My question is VISA. With all this news Visa drops 3.4%. Is there some fundamental problem with this stock. Since May it has been a dog with fleas!
9-08-2008 @ 3:59PM
Gary Wagner said...
government should stay out of business period let them go broke making bad loans they might learn something ecomony 101 freshman high school
9-08-2008 @ 4:29PM
Construction said...
Lower rates, Cramer is right. Consumer confidence is weakening as we enter the 4th quarter. Everyone I know is using low interest rates to adjust there cash flow vs expenses. Higher energy costs, required immediate payment, shifting priorities, carrying balances longer than planned.
Government needs to lower rates so we have time to adjust. Interest rates on top of these unexpected energy cost's hurt everyone. It has sucked the cash reserves right out of middle America's piggy bank.
I don't need a new car or home, I need new cheaper energy.
How about allowing us to take more money out or our retirement investments without penalizing us.
Best case scenario, lower interest rates to 1% Add in energy reduction incentive programs, put more jobs in the community. The construction / building sector is the largest employer. Let us rebuild the new American with our own talent and new technologies and lead the world in new marketable technologies.
Lets go into the holiday's, with lower interest rates and hoping each of us will see a brighter 2009.
9-30-2008 @ 2:02PM
big ceos said...
Mr CEO,
You made a clamity in the market. Do not expect government to bail your ship with taxpayers' money out.
You all CEOS should be hounded and put behind the bars for ripping the companies off with your exhorbitant remuneration and toss your HAVARD degree papers into the rubbish bin. Even the bin is not worth in holding it!!
Dead to ALL CEOS for acting like moeny sharks in the markets and ripping the shareholders off!!
You deserve no bail-out but outright hanging in open public for creating this chaos with your greed for money!!
9-30-2008 @ 2:13PM
MR CEO said...
MR CEOS,
WHat the bail out plan should be:
1. All CEOS should be hounded and sent behind bars lifetime!!!
2. Their wealth(worldwide) should be confiscated.
3. Once the wealth is confiscated then the government should use those proceeds to fund the crisis.
That is the most sensible plan to give these MORON ceos a pad on their back!!