Fannie and Freddie Now Stand Alone

We have a two-headed elephant in the room. In fact, it's the only elephant in the room now that Citigroup's (C - commentary - Cramer's Take) breaking up while declaring its dividend, Wachovia (WB - commentary - Cramer's Take) and WaMu (WM - commentary - Cramer's Take) have raised the money, Merrill (MER - commentary - Cramer's Take) and Lehman (LEH - commentary - Cramer's Take) got the financing, Bank of America (BAC - commentary - Cramer's Take) says the dividend is fine and had plenty of assets to sell, and Nat City (NCC - commentary - Cramer's Take) and CIT (CIT - commentary - Cramer's Take) are now hunky-dory. Oh, yeah, and the monolines are all fully stocked and happy if not fat again. (I know the bears think all of the above are endangered species, but these species have too many alive to count, so let's just call it a day for shorting them.)

The two-headed elephant is Fannie Mae (FNM - commentary - Cramer's Take) and Freddie Mac (FRE - commentary - Cramer's Take). These two have the most vulnerability to losses, and more important, they are basically taking one for the team.

Now, I know the drill. The earnings power is huge. Everyone's gotten out of the business. The fees are fabulous. The stocks, if you listen to the bulls, are coiled springs. You get a double on house price appreciation.

In the interim, though, owning a stock that is taking one for the team is not a good idea.

There hasn't been a single bank stock that has reported where management expressed any confidence that housing price depreciation is about to abate. More important, they have every reason to fib about this stuff. But they did that for two years, and it doesn't work.

The administration still hates these guys. Probably thinks they are just creations of the Clinton campaign. The administration would like to wreck them, make them profitless and load them up with bad loans because the only people who would be hurt would be the shareholders.

They also can't be taken over.

To me, these are the ones that just can't be justified here. You wait for their financings if you believe the bull case. You stay short them if you think that housing's deteriorating further.

They are, to some level, a systemic risk problem, as we could have another dip down if Hank Paulson continues his "I don't even know their name" attitude toward them.

They are the only perilous plays left.

At least know the elephant.

It's lurking.

And I am a bull.

At the time of publication, Cramer had no positions in the stocks mentioned.

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