The Fed Knew Nothing, but Let's Not Let AIG Die

If fear mattered, we are at the bottom. If capitulation mattered, we seem pretty close to things. If endless selling of stocks to where they represented value mattered, we should be buying.

But if AIG (AIG - commentary - Cramer's Take) is left to go belly-up and Washington Mutual (WM - commentary - Cramer's Take) is claimed by the FDIC, we are nowhere, nowhere at all, and we just have to bide our time to see where we can go -- how low we can go that is.

This is a deeply dispiriting market because we are at the mercy of a couple of financials that seem to control the whole darned world. I long for the days where a firm goes down and it takes down its investors and some people who lent it money, and then we move on.

We are so far from that, and with officials who don't get the importance of AIG, that I do wonder if anyone seems to get that AIG had this huge exposure the whole time and how important it was to not let the shorts operate on it and take it down so quickly.

It's now too late. The idea of any firm stepping in and lending money to AIG with that exposure to financial derivatives is pretty fanciful, so we must now get ready for what would be a wholesale freezing of European banks where most of the insured paper is. That's pretty cataclysmic, and without a Fed backstop, pretty ludicrous.

I can't believe that this brilliant Tim Geithner (New York Fed president) and his buddies hadn't studied that portfolio, as it was quite obvious what was going to happen here.

Now it is all downhill for the financials even as I believe the part of the market with good balance sheets and little consumer discretion can begin to stand its ground even if we take the market down another 1,000 points, which seems likely if we do not get an AIG fix. There are just too many moving parts otherwise.

ALL JIM CRAMER BLOG ENTRIES | POST A COMMENT | READ COMMENTS  

---

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. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon.com purchases by customers directed there from TheStreet.com.