Cramer's 'Mad Money' Recap: Sept. 16

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"If ever there was an institution that's too big to fail, it's AIG," Jim Cramer told viewers of his "Mad Money" TV show Tuesday.

He said if the U.S. government allows AIG (AIG Quote) to fail, there could be a catastrophic deflation of assets around the world.

Cramer said the Dow could fall 1,000 points if AIG is not fixed correctly. He said the number of individuals and businesses that depend on the company is staggering and the effects of a failure would be felt worldwide.

Cramer cited AIG's Dec. 6 conference call, when the company said it had $500 million of exposure to risky loans in Europe. With bailout estimates for AIG now approaching $100 billion, Cramer argued the amount of European exposure would have to be substantially higher.

(Editor's note: Several media outlets late Tuesday were reporting that the Federal Reserve is considering an $85 billion rescue bridge loan for AIG.)

Cramer said a failure of AIG would easily cause European bank failures and possibly failures elsewhere in the world.

Cramer said Fed Chairman Ben Bernanke "let us down" with his decision to leave the federal funds rate unchanged earlier today. He said the move "could really screw up the U.S. economy," adding the easiest way for banks to rebuild their assets is through a lower fed funds rate.

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