Cramer: An Elegy for Fannie and Freddie
Notice I am dispensing with the caveats, having hurt enough people by caveating all of the prospective tragedies in this group that have come true already (go back to the Dirty Dozen piece if you disagree.)
So with the government takeover, hopefully we can begin to get some sort of recognition of the seriousness of the situation, something that eluded the Fed last year and now eludes the Treasury and Congress and of course, the most clueless president economically in our history. This man mantra seems to be, "If cutting taxes doesn't solve it, then it can't be solved."
This whole new downturn is not because of Janet Yellen (Fire in a Crowded Theater). She's a good proximate cause. It is a recognition that the banking system could be going down here and the vanguard of the decline is the outfit meant to make housing more affordable, the government-sponsored enterprises (GSEs). After this, they won't be sponsored, they will be owned. Hopefully someone creative enough in this administration will recognize that what is needed is a huge pool of capital to buy mortgages stuck in the system -- I had thought the Fed should issue $200 billion in two-year notes and buy them, but it is way too late for that. The new recapitalized FNM/FRE will have to securitize a trillion in mortgages, offer some guarantee of a payoff, and at last we can get through this.
Of course, that presumes that anyone is at home in the government or even thinking about this.And that may be too optimistic. Either way, it's all unwinding now. Let's hope someone sees the potential for the new RTC. It is right in front of us. All you have to do is get rid of the private part of FNM/FRE -- the equity holders. Looks like that's coming, looks like it is coming like an 18-wheeler down the interstate, right at these two entities that will soon no longer exist at this pace. At the time of publication, Cramer had no positions in the stocks mentioned.
Jim Cramer writes about all the stock trades in his charitable trust for TheStreet.com in Action Alerts Plus. Recent stocks he's traded in this account include Schering-Plough (SGP), Yamana Gold (AUY) and Freeport-McMoRan (FCX).
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV