One Way to Get Out of the Mortgage Mess

What doesn't come back after the futures go down? How about structured products and anyone who touched them? How about these mortgage insurers that enjoyed a terrific short squeeze? How about the banks trying so hard to sell structured product?

I went through the Ambac (ABK - commentary - Cramer's Take) point-by-point refutation that got everyone to cover the Four Horsemen of the Apocalypse -- MGIC (MGIC - commentary - Cramer's Take), Ambac, PMI (PMIC - commentary - Cramer's Take) and MBIA (MBI - commentary - Cramer's Take) -- and in the end I come back with the same problem everyone else has but, unlike me, refuses to come out and say it: This stuff can't be valued. It can't even be valued within 40 to 50 cents on the dollar. The only thing you can do is to write the structured product to zero and then try to get more for it.

I know that sounds ridiculous. There's lots of worth here if the Fed cuts rates. If you write it to zero, the charges are going to make it so dividends get cut and there is so much red ink as to possibly make Merrill (MER - commentary - Cramer's Take) and Citigroup (C - commentary - Cramer's Take), as well as the Four Horsemen of the Apocalypse, technically insolvent.

But there simply is no other way to do it honestly. The ratings mean nothing. Any AAA that has a home equity line of credit, or HELOC, is subsequently worthless. The notion that if it is 2005 it is OK -- something spurious that Ambac put out -- is simply not in synch with what others are saying, not just Merrill Lynch. Again, I call your attention to what E*Trade (ETFC - commentary - Cramer's Take) is saying, and it's honest as the day is long.

It also means that because of the ridiculous way the tranches are set up with faux diversification -- as long as there is California the stuff may be no good -- and the impossible way that the system works (no one knows who is really supposed to collect, no one has a system to collect deadbeat mortgages, no one knows who actually owns the mortgages and the servicers are just going after the mortgages that are insured), you can't put any price on them.

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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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