Forget Moral Hazard -- We Need a Bigger TARP

Sometimes there is actual good news. We need the TARP money to be put to work right now, and Paulson's pushing for that to happen. We need it because the credit markets are every bit as bad as they were when TARP started, except this time it is Main Street hurting instead of Wall Street. Credit cards, annuities, auto loans -- all of these must be saved or securitized, and the government has to back them.

We have to, because I believe Paulson and Bernanke are worried that we were in a recession for a year starting in November 2007 and we might have entered into what looks like a depression post-Lehman. When you are in a possible depression, you can't worry about moral hazard, and this last part of TARP is totally hazardous.

I think the government is worried about the vast consumer portfolios of Wells Fargo (WFC - commentary - Cramer's Take), Citigroup (C - commentary - Cramer's Take) and Bank of America (BAC - commentary - Cramer's Take), to use the obvious. I think it is worried about the endless stream of layoffs. I think it is worried about the cost of debt -- just take a look at what El Paso (EP - commentary - Cramer's Take) had to pay this past week. The cost of corporate debt that isn't guaranteed by the FDIC is off the charts, more than any time on record vs. Treasuries.

The government is worried about the annuity benefits that are promised, even after the all-important insurance council gave them grace, boosting Met (MET - commentary - Cramer's Take), Pru (PRU - commentary - Cramer's Take) and Hartford (HIG - commentary - Cramer's Take) yesterday.

And it is worried about the possibility of the banks not lending, not offering the mortgages that are so necessary to mop up the inventory, the overhang that is killing that market.

All of these reasons have created a demand for more TARP money, and the government has to be ready.

I continue to believe that people are nuts to worry about inflation and the dollar. They should be worried about the total and utter collapse of any borrowing, which is what happened in the 1930s, and it's what is happening now.

I await a better plan to restart the credit markets. The naysayers never have a plan.

Like Democracy, it's a terrible plan, but it is the best of the lot.

Random musings: Darden (DRI - commentary - Cramer's Take) is a good example of lower oil prices and the comeback -- the same-store sales were really good. I would buy their long-term bonds, which are quite cheap. They are a direct play on the lower gasoline prices that we all see happening. ... I continue to like the biotechs on the weak dollar...

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

ALL JIM CRAMER BLOG ENTRIES | POST A COMMENT | READ COMMENTS  

---

Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon.com purchases by customers directed there from TheStreet.com.