Hedge Funds Throttling Investment Banks

The question isn't why did it go down so much, the question is why did it stop down 449? Why didn't it just keep on going?

Honestly, as someone who thought we would hold some key levels that we subsequently breached, as someone who didn't count on Goldman (GS - commentary - Cramer's Take) or Morgan Stanley (MS - commentary - Cramer's Take) being rumored to go under, I found today totally perilous and totally unreassuring.

Each day I learn something new that the hedge funds have done wrong. Each day I learn something new that the feds did wrong. Each day I learn something new that I did wrong. It is a most humbling time.

I continue to believe that the story of this era is that the hedge funds are causing a run at the banks -- the investment banks -- just like the poor folks in the '30s caused a run on the savings and loans and commercial banks.

Some of the run is malicious -- true bear raids designed to undermine everything good these firms have going for them, replete with naked shorting, ETF shorting, put-buying and rumor-mongering in concert with each other, aided by the moronic decision to get rid of the uptick rule.

Some of it is hedge funds needing to pull out as fiduciaries, making them the worst kind of customers no matter how good the investment bank. Some of it is the media, but the story's so complicated, who can blame the journalists? Some of it is just pure craziness: No more bailouts, here's a bailout. We bail out Bear but not Lehman (LEH - commentary - Cramer's Take). Or how about how the banks and brokers have to mark to market everything even when there is no market? So we are all worst case? How about that we had no disclosure? I swear if you looked at what AIG (AIG - commentary - Cramer's Take) was saying just a few months ago you would think it had next to no exposure to anything but life insurance!

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