Preferred Stock Is Key to Rescuing Banks

It's all about the preferreds. The debt of the banks. I want those to be money-good, as does the entire world.

Nationalization is what the government did to Fannie Mae and Freddie Mac, wiping out the preferreds. Brutal. Bad. And remember, those were government-sponsored enterprises, so there was always some risk that they could be taken over.

But we need to focus on the fixed-income investors in these banks. You don't need to take away all of the equity, and you need to give these managements the money they need to make it in return for a note. You need to take over the mortgage market and offer all comers 4% financing so people recognize that banks might pull out of this.

That's the way to bring private capital in.

I liked Geithner's idea of private capital. But after he said it, he simply disappeared, and in the vacuum, the shorts have pushed the stocks down to the point that it becomes self-fulfilling, a la Lehman. I can also tell you that if you nationalize the banks, I would question the solvency of Berkshire Hathaway (BRK.A - commentary - Cramer's Take), since Warren Buffett has way too much of the banks and way too much exposure to housing and to the S&P itself for him to get whole.

Nationalization, or the Fannie/Freddie solutions -- those are my big worries with Geithner. He has never disowned what he did with Lehman. How in heck do we know what he will do?

His silence is deadly. The market's crummy as it is. But the uncertainty around the banks has put S&P 700 and Dow Jones 6000 on the table for certain.

Random musings: People keep wanting me to take on Rick Santelli. And when I don't, they think I am cowardly. Anyone who knows me knows that I have been almost suicidally addicted to the fight-not-flight view. But I am also a TV person, and I know that viewers cringe, tune out or tune off when talent from the same team go at it. Rick did that to me once. I will not strike back. I do not attack or return an attack to someone on my team. ... I truly am on the fence on this Nazz. So split between Dougie's view and Helene's view, and the fundies support Helene's view, and the technical action supports Doug's view! How about that for irony?

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

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Know What You Own: Major financial stocks include JPMorgan Chase (JPM - commentary - Cramer's Take), Citigroup (C - commentary - Cramer's Take), Wells Fargo (WFC - commentary - Cramer's Take), US Bancorp (USB - commentary - Cramer's Take), Bank of America (BAC - commentary - Cramer's Take), Deutsche Bank (DB - commentary - Cramer's Take), Morgan Stanley (MS - commentary - Cramer's Take) and Goldman Sachs (GS - commentary - Cramer's Take).

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