Cramer: How Financials Can Rebuild

This column from Jim Cramer originally appeared on RealMoney on Friday, June 27. It is being republished here as a bonus for readers of TheStreet.com.

We've got one of those moments where neither the Fed nor the Treasury is relevant. The Fed thought it had done its job with the rate cuts, but mortgage rates are rallying, and the fed funds rate is not low enough for the banks to build capital.

The irrelevance of the Fed makes everything a private solution, and there is no real private solution other than everyone losing money in the credit business. I was gratified to read that the Fed is changing the rules so that private equity can get involved in the financials. That's good news -- there's a lot of capital out there. But it needs to be put to work where things are transparent, and there isn't much transparency out there.

Let's take AIG(AIG Quote) as a good example. We had thought that most of AIG's obligations that it is now taking gigantic charges for were of very short duration and were rolling off before they hurt them. We thought this because they told us that. The fact that they either didn't know or dissembled has made the common stock totally uninvestable. ...