TheStreet.com TV Recap: It's Not a Bailout, It's a Stopgap

"We're not bailing out anybody," Jim Cramer said on TheStreet.com TV's Wall St. Confidential Web video Tuesday.

There are two things going on here, he explained. "One is that the companies that do mortgage servicing don't have the ability to renegotiate every one of these contracts," Cramer said. "It's better to do it en masse with the government's help so that the people who might fight this realize that they're fighting the government, but it's certainly no bailout."

The other thing, he continued, is that "we need to slow down the process because we don't want the bank examiners to shut down all the banks," which they might do.

Cramer: Borrower Aid Is No Moral Hazard

"Take a look at what Washington Mutual (WM Quote) said," Cramer said. "Washington Mutual is in solid. Now they're going to raise a couple of billion dollars, which will tide them over until the Fed cuts and then they'll start making a lot of money again."

We need to either tide everything over or just say to heck with all the mortgage insurers. "But we have to write checks to the institutions that go under," Cramer said. "Maybe we need to spend $500 billion bailing out Fannie (FNM Quote) and Freddie (FRE Quote) and the different mortgage insurers and savings and loans.

"It really is pretty stark," he went on. "One of the reasons why I think you don't hear it presented like that ... is that it scares people."

Putting the usual caveats in, "if the housing market got dramatically better, we wouldn't have any problems," Cramer said. "It would be just terrific. If we started buying houses for whatever reason, there's no issue here." However, if people want to make it so that they don't have to pay a lot more later, "better to do this plan," he said. "That's why I think the plan's so smart."

Concerning the Fed, Cramer said he has no confidence in it whatsoever. "The Fed has been completely wrong; we've seen that time and again," he said. "They did that one half-point cut, [which] was very good, but then they thought they were done." (The Fed cut the fed funds rate by a quarter point today.)

It has become "a group of guys who you really have to struggle with and you can't count on them," Cramer went on. "And that's OK, too. There have always been moments in history of investing where the Fed was totally unbankable.

"Right now I think the Fed is torn between doing what would certainly be the right thing and doing the right thing incrementally over time," Cramer said. "What I'm saying is the more time you waste, the worse it gets. That's very clear from what's going on.

"We have to make it so that if you were to put money in Washington Mutual in the big convertible that you don't expect to just lose money," he said. It's very easy to do a quarter point because that doesn't shock anybody and it doesn't make people feel as if things are very bad. It basically says that the Fed sees what's happening.

It's just that Cramer said he's been seeing things snowballing since July and he doesn't see the real danger of a half point here.