Jim Cramer's 'Stop Trading!': Save AIG

Jim Cramer said Monday on CNBC's "Stop Trading!" that it would be a tragedy if the government lets troubled AIG(AIG Quote - Cramer on AIG - Stock Picks) fail.

"I would radically have to change my view of where the market goes if it fails," Cramer told Erin Burnett. "This one needs to be stopped. I don't know how to stop it."

AIG will be allowed to use $20 billion in assets held by subsidiaries to help stay in business, New York Gov. David Paterson said in a news conference Monday. The insurer, which has already raised $20 billion in fresh capital in 2008, on Sunday turned down an offer from private equity firm J.C. Flowers & Co. that would have allowed the investor to acquire AIG for $8 billion under certain circumstances, The Wall Street Journal reported.

Cramer explained that there are two kinds of insurance, such as property/casualty, and life, which would deal with situations such as a hurricane. But in AIG's case, financial insurance, "it's really hard to figure out what they've insured."

"This is not Bear, or Lehman(LEH Quote - Cramer on LEH - Stock Picks) where all they have is Neuberger."

Companies in the former category are Allstate(ALL Quote - Cramer on ALL - Stock Picks), , MetLife(MET Quote - Cramer on MET - Stock Picks), Prudential(PRU Quote - Cramer on PRU - Stock Picks), Chubb and Travelers (TRV Quote - Cramer on TRV - Stock Picks).

The other, riskier group includes AIG, MBIA(MBI Quote - Cramer on MBI - Stock Picks), PMI(PMI Quote - Cramer on PMI - Stock Picks) and Ambac(ABK Quote - Cramer on ABK - Stock Picks).

"AIG is so opaque; they never disclosed what they own," Cramer said.

"If you could just call a timeout, AIG would be able to sell a lot of different things," Cramer said. "If it's in free fall [and beaten down by the shorts], and we don't change the uptick rule. ... AIG must not fail."