Cramer: Obama Must Address Housing Problem

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He either speaks about housing or he speaks about nothing. Today's the day.

Throughout the last three years of incredible calamity, President Bush and his minions never told the truth. They never said, "We must find ways to keep people in their houses and raise the value of homes."

They talked about lowering mortgages. They talked about redoing mortgage loans but never did anything about it. They talked about buying bad mortgages from banks and never made the move. They talked about making Fannie Mae (FNM Quote) buy more mortgages, and it never did. They talked about everything but supply and demand and the inventory of homes and house price depreciation.

And their ignorance is why we are in this fix. At the core of this whole downturn are the instruments that contain billions of dollars in mortgages. If they were ever to stabilize, we would have a whole new world where a bank's losses would not be inevitable as they are now. The reason why the UltraShort Financials ProShares (SKF Quote) can be used to destroy every bank in it, particularly now that Bank of America (BAC Quote) and Citigroup (C Quote) hardly represent enough "equity" to knock them down, has to do with the obvious recognition that every mortgage issued since 2005 -- every last one of them -- has an increasing likelihood of defaulting,. Everything, from today's bad State Street (STT Quote) news to the radical fall of JPMorgan Chase (JPM Quote) and Wells Fargo's (WFC Quote) stocks, has, at its heart, house price depreciation.

If Obama does not attack this issue square on with twin initiatives to sop up inventory with a one-time tax credit of $25,000, enough basically to get a new homeowner off the sidelines to buy a $200,000 house (where the average price is headed), then the banks will continue to default, and the problem will never end. Plus, the wealth effect will continue to diminish because the stock side and job side of the ledger are so bad.

Will the Obama administration turn the economy around?
	Yes. Things will improve in 2009 Yes. But it's going to take a few years No. The downturn is too severe and getting worse No. There are too many factors that can't be controlled