The Feds' Cluelessness Still Amazes Me

You see AIG (AIG)? You see it sneaking higher and higher? You see the businesses it is now selling off and how much they are worth?

That's what happens if you have time. That's what should have happened to the too-big-to-fail Lehman Brothers. It would have been the same way. In fact, I would argue that Lehman had even more saleable assets than AIG, assets that if it had a chance to sell -- notably the ones that everyone is bidding for or has bought, and if it could have just been given the same deal -- it would have been a home run. We would not be in this credit crisis if the government had given Lehman a similar deal. We would not have had the breaking of the buck, we would not have had the insurance collapse, we would not have had the forced shooting of stocks because the hedge funds couldn't get their cash back, we would not have had the runs on Goldman (GS) and Morgan Stanley (MS), and we would not have had a level of turmoil that has frozen all credit markets.

The government's capriciousness is legion: Fannie (FNM) and Freddie (FRE) "are well capitalized," then they are seized. Bear is too big to fail at $300 billion in debt, Lehman is not too big to fail at $700 billion. Washington Mutual gets seized for bad loans, but Downey (DSL) and BankUnited (BKUNA) are allowed to keep playing with their toxic loans. And now that Wells Fargo (WFC) and Citigroup (C) want to pay more for Wachovia (WB) than the FDIC ever thought it was worth shows you that the FDIC is every bit as incompetent as the Fed and capricious as the Treasury. You did not need government assistance to sell WB. That's an outrage, especially given the Sept. 29 tax law change that allows Wells to take a huge tax deduction on all of Wachovia's bad mortgages when it writes them down, drastically reducing its tax bill against ordinary income.

We still don't know the extent of the damage still coming from Lehman. But we do know that the federal government has made it so we are all afraid.

That's not going away.

My hope is this -- new president, better team.

At the time of publication, Cramer was long Goldman Sachs and Morgan Stanley.

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