Beneath the Veil of Uncertainty

Rather than carp about TARP and the way the government's handling the repayment, let me state simply that it needs to put out a formula -- something more than it can just issue equity and the ability to do a non-FDIC-backed-debt deal. The government has to because it is putting a big lid on a bunch of stocks that are now suspects for new deals: PNC (PNC - commentary - Trade Now), US Bancorp (USB - commentary - Trade Now) and Wells Fargo (WFC - commentary - Trade Now).

If we knew the repayment formula, that would remove a gigantic amount of uncertainty and therefore have a hugely positive effect. That would allow the stocks to really take off.

And what happens when they do pay back TARP? Here's the main reason why these banks want to pay back TARP: it is not PR, it is not to get out from under the yoke of the government -- it is the onerous cost of the debt itself.

If you pay back TARP, your numbers go up huge. My best guys are telling me that JPMorgan Chase had to pay out about $325 million in TARP preferreds in the first quarter, which annualizes to about 32 to 33 cents a share. Sure, doesn't sound like much, but when you consider that the company's slated to earn only $1.53, you can see that 32-33 cents is a hugedeal.

You could get a gigantic earnings surprise if repayment occurs.

Repayment's just not in the numbers.

Short-term is tough for the banks because you don't know if you are about to be slagged by a secondary at any given moment.

But you remove that uncertainty and the yolk of TARP payments, you have a group where the numbers are way too low -- especially if you are in the mortgage business, where the numbers are exploding in many areas to 10 times last year -- and a huge, huge bargain.

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

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