Why We Need a Subprime Wipeout

I'm getting fabulously negative feedback on saying anything positive about the mortgage market, which I love. I am hearing suddenly that people without good collateral or the ability to put money down are now not getting loans. I am hearing that far fewer loans are being given. Get this: I'm hearing that candidates for default are not being given loans.

Amen.

I want to reiterate that I am actually far more bearish than anyone on the actual lenders addressing the subprime market. I believe they're all going to go bankrupt, every one of them. I don't believe a thing they say. I believe that that their assumptions are dead wrong.

I also believe that the companies that bought subprime loans, including some of the major banks because they wanted the subprimes to package, are going to have to take a giant hit to their balance sheets. I don't know of anyone saying that. I believe that there will be a dramatic decline in the number of loans issued, including, ultimately, a decline in loans to some borrowers who are deserving of the credit.

And then I believe the Fed will act. Plus, I'm of the opinion that this will all happen very, very soon.

In fact, I'd like to find the most negative guy on this issue and trump him.

Because all I care about is the darned Fed. You can't get to where I believe we'll ultimately go with this market until all of these defaults and crises happen. Right now, the Fed still believes that everything is fine.

It takes a crisis to get the Fed off the dime.

That people don't understand my rationale is driving me crazy, so let me put it really straight: There will be a total wipeout of this subprime lending industry. And that is good. It will wipe out the speculation in housing once and for all.

And then we'll get a nice bottom and a ramp, and we end up happily ever after as we did after the savings and loan crisis, after the Mexican crisis and after the Long Term Capital crisis.

OK?

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Jim Cramer is a director and co-founder 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. Click here to order Cramer's latest book, "Mad Money: Watch TV, Get Rich," click here to order his book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here.

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