Fannie and Freddie Should Raise Equity

Are Fannie (FNM - commentary - Cramer's Take) and Freddie (FRE - commentary - Cramer's Take) going take advantage of the short squeeze? Freddie seemed to be saying last week that it will, now it is Fannie Mae's turn. Of course, the bulls say they don't need to raise any equity, but if we could get their viability off the table, it would go a long way to taking the big bank runs off the table.

It doesn't take a genius to realize that housing's still going down in value. But you also can see imperative it is for the system to work its way through without government help, because we will then be so bogged down with political strife that nothing can get done.

I want a housing bill that helps housing but does not help these two agencies, or I want them taken over with the taxpayers benefitting. But that can only happen if they raise money.

To me, these rallies are less about the earnings at Bank of America (BAC - commentary - Cramer's Take) and much more about the SEC gunning for the shorts. There's lots of harping on how the stocks have run from the bottom, but that's because the shorts had pressed them down so much that they couldn't refinance. (Washington Mutual (WM - commentary - Cramer's Take), with its big deposit base, is in a similar situation, and if it reports a BAC-style quarter, you can see it poised to rally and raise more money. Wachovia (WB - commentary - Cramer's Take) is about splitting into a good and bad bank, and that can happen on the backs of the shorts, too. AIG (AIG - commentary - Cramer's Take), without the big deposit base but with an admirable worldwide insurance business, also needs to issue some equity here to take advantage of the squeeze.)

Now the longs and the shorts are buying, and the need for more equity is vital for both. They take it or we are back to the congressional drawing board, and that just can't be counted on.

At the time of publication, Cramer had no positions in the stocks mentioned.

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