It's Merge or Die for the Banks!

TARP failed.

It failed because Paulson didn't follow through, It has become another Lehman Brothers, something that was unexpected that has made the bank stock world collapse to the point where there are no banks with any sizable equity and the sector is vanishing as part of the S&P 500.

What to do?

The feds have to get 'em in the room and shotgun merger them -- you merge or die!

The whole nonsense of giving billions to the institutions to lend without restrictions was completely moronic -- just incredibly dumb.

Some of my sources are indicating that the prime brokerage demands alone for hedge funds require a trillion dollars in liquidity, well over what any one bank can afford or any 10 separate banks.

Now is the time for the feds to say, "OK, you, Citigroup (C - commentary - Cramer's Take), and you, Morgan Stanley (MS - commentary - Cramer's Take), and you, Bank of America (BAC - commentary - Cramer's Take), are all one bank now; sort it out. JPMorgan Chase (JPM - commentary - Cramer's Take) and Goldman Sachs (GS - commentary - Cramer's Take) and U.S. Bancorp (USB - commentary - Cramer's Take), you are a single bank now. Wells Fargo (WFC - commentary - Cramer's Take) and SunTrust (STI - commentary - Cramer's Take) and PNC Financial (PNC - commentary - Cramer's Take), you are a bank. And while we are at it, you, Prudential (PRU - commentary - Cramer's Take), and you, MetLife (MET - commentary - Cramer's Take), and you, Hartford (HIG - commentary - Cramer's Take), and you, Principal (PFG - commentary - Cramer's Take), are one firm. Maybe we give you all to Travelers (TRV - commentary - Cramer's Take)."

We need these now so that we can cordon off the winners, and we need it as part of the eight-point plan I outlined earlier because he who defends everything, as Moltke taught us, defends nothing, and right now, with all of those handouts, we have defended nothing. We set up these four or five banks and insurers, we insure their bonds and preferreds, and we get things going again. No common stock dividends. No bonuses. I mean, where the heck are the execs going to go anyway? We waive all capital requirements for these, and we do not destroy them if they write down their mortgage portfolios. Again, this needs to be done, now.

No more Lehman-like dissembling that the government doesn't have the authority to do it. We have bombed whole countries, for heaven's sake, without the "authority" to do it. The government's now ridiculous insistence that it could do nothing is a repulsive cop-out that every single serious person in finance in this country knows to be untruthful.

Right now, we are defending everything; we are defending nothing.

At the time of publication, Cramer was long Morgan Stanley, JPMorgan Chase and Goldman Sachs.

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