Keep the TARP Money Until Things Get Better

Breather day? Or does this monster ever breathe?

We are seeing stress levels coming down: the magic VIX going under 40?, money coming in, industrials bouncing -- I watch International Paper (IP - commentary - Cramer's Take), Du Pont (DD - commentary - Cramer's Take), Packaging Corp. (PKG - commentary - Cramer's Take) and Ingersoll Rand (IR - commentary - Cramer's Take) for true industrial bounces. We are seeing the rails and the fertilizers -- two 2008 sectors -- regaining life and lifetime moves in a session.

But it was and is and always will be about the banks, and no matter what we do it will come back to them. They are the reason we got in trouble, and they are the reason we got out of trouble.

I know the meeting with the president is significant, and I believe the tone will be less populist and more of a "no footrace to give back TARP until we are a little stronger." But if we are going to get that then we have to have some reason for the banks not to give up TARP, and we all know that means forbearance. You keep the money until things get better and then you return it, because right now there is no real onus (beyond embarrassment) for taking it.

I think that you simply can't make it so some of them that can return it, therefore pressing it so others return it that can't and then get in trouble again. That's as politically unpalatable as what happened with AIG (AIG - commentary - Cramer's Take) and to a lesser extent Citigroup (C - commentary - Cramer's Take). It is the repeat bailouts that irritate, not the single shots.

That's why I now like Bank of New York (BK - commentary - Cramer's Take) and State Street (STT - commentary - Cramer's Take), because I think the government's going to suspend tough accounting and presume, as the bankers do, that most loans can be worked out to maturity or adjusted.

I think the rally in banks is about the pressure being off for now and letting them build earnings to improve balance sheets, something that makes sense if house price depreciation is off the table for now.

Nonetheless, that doesn't mean screaming higher. I said take some profits in the group yesterday, and I reiterate that today, but the ones to buy on weakness are STT and BK, not C or Bank of America (BAC - commentary - Cramer's Take). We need some earnings power to exhibit itself immediately, and those are the two that benefit the most from the generous accounting changes that are coming as part of the deal to keep TARP and get us through this.

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.