If We 'Let It Happen,' the Center Cannot Hold

Maybe Sheila Bair doesn't matter at all. Maybe nothing matters. The chatter behind the scenes everywhere is, "Just let it happen, it can't be any worse than this."

I say, are you kidding me? Do you know that our whole country would simply stop if we didn't have these programs and these government promises?

Think of it like this: If you have models that show 10% unemployment and you offer credit cards, your model says don't offer them. But if the government didn't guilt-trip these companies into offering them, you couldn't get one.

Do you think there is a single home equity loan that any bank would really want to make? Why would they? Total loser.

Do you think there is a project worth taking on if the dollar is soaring and we don't know the price of oil?

Nothing, nothing in this economy would happen at all.

Sure, if Bair were in charge there would be clarity. There would be some rationality. She knows from IndyMac how many people default at what level of interest deduction and she knows that at a certain level of interest rate deduction people stay in their homes because it is cheaper than to rent and there are homeownership intangibles that make people want to stay in them.

If Geithner were interested in the data, he would be able to make determinations about how much capital a bank needs to stay alive. Even better, though, would be if Bair were allowed, in exchange for a preferred note from a bank, to give that bank a note with full faith and credit of the FDIC, which would then insure its survival until some later time -- certainly longer than the six months that the banks have to raise private capital (who would be stupid to give them that?). Then a major cloud would lift.

I suggest you go over the paper submitted here by the Federal Home Loan Bank Board, which has all of this spelled out and was clear that Bair was amenable to.

In either case, in every case, letting the marketplace dictate things is a recipe for disaster because the marketplace is being controlled -- quite rightly, as they are meant to make a profit -- by the short-sellers.

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Random musings: When Ed Liddy took over AIG (AIG - commentary - Cramer's Take), he made all sorts of projections about how things will be great, and I told him on "Mad Money" he should keep his mouth shut and his people really screwed up. I said the bailout would cost us $200 billion with no hope of getting the money back because AIG was a rogue outfit. He came after me pretty hard. He should have just shut his mouth, because AIG is hopeless, beyond redemption. ... No answer from Bair about why Corus (CORS - commentary - Cramer's Take), Bank Atlantic (BBX - commentary - Cramer's Take) or Bank United (BKUNA - commentary - Cramer's Take) aren't closed. ... She did say that funding issues at Wachovia were a problem -- bad for Wells Fargo (WFC - commentary - Cramer's Take). She also implied that Wells should cut its dividend to conserve cash.

At the time of publication, Cramer was long Wells Fargo.

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Know what you own: Other companies in the banking industry include Citigroup (C - commentary - Cramer's Take) and Bank of America (BAC - commentary - Cramer's Take).

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