Jim Cramer's 'Stop Trading!': Save AIG

Jim Cramer said Monday on CNBC's "Stop Trading!" that it would be a tragedy if the government lets troubled AIG(AIG Quote) fail.

"I would radically have to change my view of where the market goes if it fails," Cramer told Erin Burnett. "This one needs to be stopped. I don't know how to stop it."

AIG will be allowed to use $20 billion in assets held by subsidiaries to help stay in business, New York Gov. David Paterson said in a news conference Monday. The insurer, which has already raised $20 billion in fresh capital in 2008, on Sunday turned down an offer from private equity firm J.C. Flowers & Co. that would have allowed the investor to acquire AIG for $8 billion under certain circumstances, The Wall Street Journal reported.

Cramer explained that there are two kinds of insurance, such as property/casualty, and life, which would deal with situations such as a hurricane. But in AIG's case, financial insurance, "it's really hard to figure out what they've insured."

"This is not Bear, or Lehman(LEH Quote) where all they have is Neuberger."

Companies in the former category are Allstate(ALL Quote), , MetLife(MET Quote), Prudential(PRU Quote), Chubb and Travelers (TRV Quote).

The other, riskier group includes AIG, MBIA(MBI Quote), PMI(PMI Quote) and Ambac(ABK Quote).

"AIG is so opaque; they never disclosed what they own," Cramer said.

"If you could just call a timeout, AIG would be able to sell a lot of different things," Cramer said. "If it's in free fall [and beaten down by the shorts], and we don't change the uptick rule. ... AIG must not fail."