Cramer on The 'Frightful' Korea Situation

How quickly we forget our own financial problems. This morning some irresponsible "senior administration official" was quoted in the New York Times as saying that the size of the Korean bank bail-out could be "frightening."

Now I am shaking.

Doesn't anybody else remember what it was like in this country seven years ago? Citicorp was going down everyday at a pace that made it look like bankruptcy was in the cards. People were telling me I was nuts to keep so much money in my Chemical checking account. The Bank of New England vanished literally overnight. Every bank I used in Brooklyn closed its doors.

It was terrible. Banks would close and re-open as other banks and then close again within months, only to re-open as branches of out-of-town banks that would then fold! Analysts were predicting the demise of Wells Fargo pretty much on a daily basis. I went to a hedge fund dinner and I was the only one not short Wells Fargo! I felt naked. The average money center bank carried a "strong sell" as its rating, and analysts were petitioning to have something even more negative to use to warn people away from this group.

Meanwhile, the politicians in Washington seemed more inclined to favor a couple of big donors rather than take tough action. The situation was more than a little frightening. What happened?

We bit the bullet, we closed hundreds of banks, we set up the Resolution Trust Corporation and raised billions of dollars from taxpayers to save the system. We cut rates and we allowed profitable banks to merge on sweet terms with unprofitable ones. We found princes to buy Citicorp stock and we protected the assets of everybody, to the detriment of the stockholders.

In three years, you didn't know the difference. The system grew strong enough to weather a colossal shift in interest rates in 1994. In five years our banks began to re-assert themselves as global forces. In six years the average bank was massively OVER-capitalized and began buying massive amounts of stock back. By the millennium it would not shock me if U.S. banks and brokers have the largest market share in Latin America and Southeast Asia.

So, the next time some senior American official is quoted as saying that the Korean bank situation is frightening, tell him to go get a November 1990 Journal. Look at those bank prices. That was frightening. What a fabulous opportunity that was.

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Random Musings: We are working on a host of improvements to TSC all of the time, including chat rooms, charts, graphs, the works. These things take time and we want to do them right. Our overhaul of customer service is almost complete, but it took our minds off a lot of improvements that should have happened already. Don't worry, I'm still not happy with it, but it's better! Stick with us; we will work these things out.

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