Jim Cramer's Best Blogs

Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:

• more home-equity losses,
• the power of the heartland, and
• Icahn vs. Yang.

Click here for information on RealMoney.com, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.

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Still More Losses on Home-Equity Loans? You Don't Say!

Originally published on Tuesday, May 13, at 1:33 p.m.

Let me say at the outset that I am not accusing anyone of lying. But it is disheartening to see Bank of America (BAC Quote) widen the loss guidance on home-equity loans.

Look, here is the truth about home-equity loans, and everyone in the business knows it, but nobody talks about it.

A gigantic amount of people took out home-equity loans after putting little money down for their houses. They stop paying back the home-equity loans and they gamble they will not be foreclosed. They are mostly right. The complications with how these loans were made and who owns them and the smaller size of them make them really hard to focus on. The people who took them are now using their credit cards and will most likely default on them, too, which is why Capital One (COF Quote) should be sold up here.

What bothers me is that the banks did no due diligence and don't seem to know the collateral. If you bought a home with little or no money down and you attached a home-equity loan to it, the loan's going to fail. You know it, I know it, Bank of America knows it. But they persist with the fiction that there won't be that huge a number of defaults.