Why did the Fed really do what it did yesterday, which is go nuclear, pull out the stops, make sure that people realized it was worried only about deflation and recession?
Because it reads the newspapers and watches TV. It was impossible to listen to Jamie Dimon last week and realize that nothing was working that they had done yet. He basically told you, "It ain't working, it ain't going to work." They know they are staring at a Citigroup (NYSE: C) (Cramer's Take) and a Wells Fargo (NYSE: WFC) (Cramer's Take) that have tens of billions of mortgages still on their balance sheets that TARP ain't ever going to buy. Bank of America (NYSE: BAC) (Cramer's Take) is loaded to the gills with the stuff.
But more important is the layoffs. Day after day they come in and hear about Bristol-Myers (NYSE: BMY) (Cramer's Take) firing 10% of this or Goldman (NYSE: GS) (Cramer's Take) firing 10% of that or Best Buy (NYSE: BBY) (Cramer's Take) slashing payrolls and BAC laying off 30,000 people. They are watching the employment claims and they see that things are about to go to 10% -- that all-bets-are-off territory where everything goes awry and defaults for everything skyrocket.
You see the largest corporations in the country have thrown down the gauntlet. "We will fire everyone we need to fire to adjust to this new world," they are saying. The companies are saying that Main Street is going down, but they are not going to go down with it.
Yes, the Fed acted out of desperation. It had to drop the pretense -- under which it was still operating -- that the risks are balanced!
Balanced!
I mean the risks between a severe recession and a depression.
They have chosen wisely. Late, but wisely,
Now let's hope other nations join them.
Jim Cramer is co-founder and chairman 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 Goldman Sachs.
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Reader Comments (Page 1 of 1)
12-17-2008 @ 11:24AM
beachpaul said...
Wisely? Let's just do what the Bank of Japan did in the nineties, reduce the rate to zero. Oh, but won't we get the same result than the Japanese did? No, we won't get a ten year re-run of Lost in Space. Why not? Because we are America, and all the people on TV said so. Pass the vicodan, Rush!
12-17-2008 @ 6:35PM
bob said...
THE ENTIRE MARKET IS A PONZI SCHEME AND ALWAYS HAS BEEN. ALL THE FUNDAMENTALS ADD UP TO YET ANOTHER GENERATION STRIPPED OF THEIR WEALTH WHEN THE MUSIC STOPS. NOW WE'VE ADDED TERRY AND THE PIRATES TO THE MIX SO THE THIRD WORLD CAN BE ADDED TO THE SUCKER LIST. AN ABSOLUTE AND UTTER DISGRACE.
12-27-2008 @ 6:31PM
Marvin said...
By the time the money trickles down to the average worker or consumer to be spent into the system the damage will be catastrophic. The government has given the money to the rich who are misusing and hoarding it. BIG MISTAKE!!! The "banks are stopping the flow of money." They are making it "impossible" for the average person to get a loan, raising interest rates on credit cards, lowering spending limits on existing lines of credit, all because of their mistakes. At this same time the average individual is still trying to recover from the outrageous high fuel and medical costs. GET A CLUE!! "They have no extra money to spend." No money moving in the economy means a slower economy! It would have cured the situation much quicker if they had dispersed all that money to the poorer/average individuals who would have spent the money into the system. That would have started a chain reaction of spending and would have given the economy a huge boost. It is very clear it will take months or even years before the banks will help this situation, if anything they are making it worse. They are giving very little to the huge masses who have little to spend and huge gifts to the richest of the nation and they will do very little to fix the problem. But thats our government for you! Why do think we are in this mess in the first place!