Maybe Sheila Bair doesn't matter at all. Maybe nothing matters. The chatter behind the scenes everywhere is, "Just let it happen, it can't be any worse than this."
I say, are you kidding me? Do you know that our whole country would simply stop if we didn't have these programs and these government promises?
Think of it like this: If you have models that show 10% unemployment and you offer credit cards, your model says don't offer them. But if the government didn't guilt-trip these companies into offering them, you couldn't get one.
Do you think there is a single home equity loan that any bank would really want to make? Why would they? Total loser.
Do you think there is a project worth taking on if the dollar is soaring and we don't know the price of oil?
Nothing, nothing in this economy would happen at all.
Sure, if Bair were in charge there would be clarity. There would be some rationality. She knows from IndyMac how many people default at what level of interest deduction and she knows that at a certain level of interest rate deduction people stay in their homes because it is cheaper than to rent and there are homeownership intangibles that make people want to stay in them.
If Geithner were interested in the data, he would be able to make determinations about how much capital a bank needs to stay alive. Even better, though, would be if Bair were allowed, in exchange for a preferred note from a bank, to give that bank a note with full faith and credit of the FDIC, which would then insure its survival until some later time -- certainly longer than the six months that the banks have to raise private capital (who would be stupid to give them that?). Then a major cloud would lift.
I suggest you go over the paper submitted here by the Federal Home Loan Bank Board, which has all of this spelled out and was clear that Bair was amenable to.
In either case, in every case, letting the marketplace dictate things is a recipe for disaster because the marketplace is being controlled -- quite rightly, as they are meant to make a profit -- by the short-sellers.
Click here to get the piece.
Random musings: When Ed Liddy took over AIG (NYSE: AIG) (Cramer's Take), he made all sorts of projections about how things will be great, and I told him on "Mad Money" he should keep his mouth shut and his people really screwed up. I said the bailout would cost us $200 billion with no hope of getting the money back because AIG was a rogue outfit. He came after me pretty hard. He should have just shut his mouth, because AIG is hopeless, beyond redemption. ... No answer from Bair about why Corus (NASDAQ: CORS) (Cramer's Take), Bank Atlantic (NYSE: BBX) (Cramer's Take) or Bank United (NASDAQ: BKUNA) (Cramer's Take) aren't closed. ... She did say that funding issues at Wachovia were a problem -- bad for Wells Fargo (NYSE: WFC) (Cramer's Take). She also implied that Wells should cut its dividend to conserve cash.
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 Wells Fargo.
Black Friday expected to be strong, no promises for Christmas
Will JPMorgan chief Jamie Dimon be our next Treasury Secretary?
Gold surges to another new high of $1167 per ounce
Reader Comments (Page 1 of 1)
2-26-2009 @ 11:48AM
paul s said...
"And what rough beast, its hour come round at last", eh Cramer. It is always the "short sellers" fault that these banks are under siege. The financial sector brought this upon themselves through their own deceit. They are still trying to deceive. Let the stress tests reveal the truth. Maybe. If not, the short sellers will. Americans hate the truth. We like the Disney world view with an APPL in our ear and we need another credit card like Custer needed another Indian. Remember Cramer, " the best lack all conviction, while the worst are full of passionate intensity".
2-26-2009 @ 11:55AM
Allen said...
The problem with AIG is that, as Mr. Cramer has said, it is a rogue enterpprise. Its corporate culture has always been one of rip-offs. Examples abound in its products (insurance that actually provides no coverage - people have been shocked when I have shown them that an extended warranty through AIG is totally worthless!), an ingrained culture that the customer is always wrong, and as Hank Greenberg (former AIG CEO) once said - "Service? What service!"
Unfortunately, Edward Liddy is proving to be as big a thief as his predecessors, Greenberg, Sullivan and Willumstad - or at least every bit as corrupt and incompetent.
It is way past time to turn of the cash spigot and cut our losses. AIG is already dead on arrival - lets proceed with the funeral and cremation!
2-26-2009 @ 12:27PM
Kate said...
B of A and Citibank have each taken 40 billion plus of tax payers money and they need more. We are rewarding bad behavior with bailout funds. The government should have taken the bailout money and sent every tax payer in the US a check. Tax payers would have paid their bills (banks still would receive money), bought food and spread the wealth around. That would have spurred our economy. Big financial institutions will not spread the wealth, they're proven that already. Banks hoard the money and use it to pay their own debt. B of A raised
credit card interest rates to 30% to good customers. Tax payers get screwed at both ends. I say we STOP paying credit card debt and keep what money we can, so that we can pay our mortgage payments and put food on the table. Americans can't trust the government (who is bought by big business) to help us. We need to take direct action ourselves. Americans out number politicians, so we have the power.
2-26-2009 @ 7:55PM
winslow said...
Capitalism run amuck. Until the public understands that high-powered individuals do not have absolute control in this country, there cannot be progress.
2-26-2009 @ 3:45PM
mahaffeym said...
AIG is not worthless or corupt..a few made large msitakes.
That is uncalled for and you are so blantently a wise A...jerk.
Who made you the great guru?
The entire economy is in deep trouble...
AIG is suffering because of it and yoour types who make it even tougher.
2-26-2009 @ 5:06PM
Allen said...
In response to Mahaffeym, yes, AIG is both worthless and corrupt - and Edward Liddy is one of the less competent CEOs out there, although I will concede that he is better than former CEO Martin Sullivan, who was totally unqualified to hold any corporate office. And, yes, a few grossly overpaid individuals made large mistakes, for which they have not been held accountable, the result of which is being foisted upon the rest of us.
As for why AIG is suffering, it is solely because of AIG yes people like you, Mahaffeym, who were afraid to satnd up to the bogus computer models which the AIG executives believed. (Everything at AIG was based upon "models", even when they were proven to be wrong.
I stand by my earlier comments 100% and am opposed to the donation of any more tax dollars to AIG. Instead, I would suggest that the government initiate RICO suits against AIG and its management to recover the tax dollars given by the Bush administration, which was largely done to repay favors owed by Paulson to Goldman Sachs, which ultimately was a major beneficiary of the AIG bailout.
It is time to close AIG down....before any more money is wasted!
2-26-2009 @ 9:35PM
beachpaul said...
"Things fall apart, the center cannot hold". You have been reading Yeats, Comrade Cramer. This market must really be getting to you.