The Fed Finally Gets It

Why did the Fed really do what it did yesterday, which is go nuclear, pull out the stops, make sure that people realized it was worried only about deflation and recession?

Because it reads the newspapers and watches TV. It was impossible to listen to Jamie Dimon last week and realize that nothing was working that they had done yet. He basically told you, "It ain't working, it ain't going to work." They know they are staring at a Citigroup (C - commentary - Cramer's Take) and a Wells Fargo (WFC - commentary - Cramer's Take) that have tens of billions of mortgages still on their balance sheets that TARP ain't ever going to buy. Bank of America (BAC - commentary - Cramer's Take) is loaded to the gills with the stuff.

But more important is the layoffs. Day after day they come in and hear about Bristol-Myers (BMY - commentary - Cramer's Take) firing 10% of this or Goldman (GS - commentary - Cramer's Take) firing 10% of that or Best Buy (BBY - commentary - Cramer's Take) slashing payrolls and BAC laying off 30,000 people. They are watching the employment claims and they see that things are about to go to 10% -- that all-bets-are-off territory where everything goes awry and defaults for everything skyrocket.

You see the largest corporations in the country have thrown down the gauntlet. "We will fire everyone we need to fire to adjust to this new world," they are saying. The companies are saying that Main Street is going down, but they are not going to go down with it.

Yes, the Fed acted out of desperation. It had to drop the pretense -- under which it was still operating -- that the risks are balanced!

Balanced!

I mean the risks between a severe recession and a depression.

They have chosen wisely. Late, but wisely,

Now let's hope other nations join them.

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

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Know what you own: Cramer mentions Bank of America. Other companies in the financial industry include Wachovia (WB - commentary - Cramer's Take) and Morgan Stanley (MS - commentary - Cramer's Take).

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