Fed Isn't Ready to Act on Financials -- Yet

On Oct. 3, 1998, I stood in front of the Liberty Bell in Philadelphia, 150% long, and heard Alan Greenspan say that the system was strong, that the economy was quite strong and that the Fed was wary of inflation, not growth.

Sound familiar?

I wanted to die. I was so long the banks, like Downey (DSL - commentary - Cramer's Take) and Bank of America (BAC - commentary - Cramer's Take) and Lehman (LEH - commentary - Cramer's Take) as well as a half-dozen savings and loans and Greenspan wrecked my profit-and-loss statement. He seemed completely oblivious to the credit crunch that had struck the month before. He didn't even seem to know about the implosion of Long Term Capital -- which, by the way, was bigger, if you count the leverage, than the mortgage market in terms of impact to the bottom line.

Criminal, I thought, criminal that the Fed could be that clueless. The market wasn't, though.

It sold off hard, like it did yesterday. And like it threatens to do again any day now.

Now we hear about the closing of the mortgage markets and the corporate debt markets. And they are closed. I am not in denial about that. It is going to get worse. I don't disagree.

There will be days of short-squeeze strength -- does anyone really believe that the worst is over for Centex (CTX - commentary - Cramer's Take)? But in general, the view is correct: Things are not good out there. The mortgages are bad, the corporate high yields can't get sold. Neither is in the interest of this nation. Neither. They are in crisis.

Just like Oct. 3. I know it; you know it. The Fed doesn't.

Or does it?

Five days after Oct. 3, when Alan Greenspan said the economy was strong and inflation was the worry, he called an emergency meeting to cut rates in order to end the freezing of the markets. That's right, emergency meeting.

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