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(C) - Get Citigroup Inc. Report

plan to split itself into two banks -- the retail/service/investment bank and Citi Holdings, which would consist of (among other things) the household lending arm and the old special purpose vehicles -- will work if the government gives it time. It will work for the same reason the "

Bankers Win Big in Toxic Pay Plan

," article in

The Wall Street Journal

states: Much of what was thought to be worthless or worth pennies in Citi Holdings is really money good and will pay off when due.

That's how you can get the book value of Citigroup to go up, and given that Tier 1 capital has not been an issue -- they have a ton of it -- you are going to see book go up quarter after quarter.

There is a realization all over Wall Street these days. The realization is that the real problem, the real rot in the system, is the brokered mortgage pool put together by the likes of all of those slick originators, the


and the

New Centurys

and the


and the

American Home Mortgages

. We are discovering -- everyone from


(WFC) - Get Wells Fargo & Company Report

to Citigroup to


(MBI) - Get MBIA Inc. Report

-- that much of this stuff was a joke, where people were basically kiting houses liked they kited checks. We still can't get our arms around how big it is. It seems that the stuff bought in 2005-2006 is worthless, especially the second-lien brokered mortgages. (Wells Fargo has the most on this and has talked about it endlessly.) The fraudulence here is incredible. So there's no coming back from that paper.

But asset-backed paper is surprisingly good at this point in the cycle, and so are many student loans. The bulk of what's going to be in Citi Holdings is going to pay off, and then it can be run as a runoff institution and the costs taken out of it.

I mention all of this because I am going to follow up repeatedly on my change of heart at Citigroup, repeatedly, because it is the great call on the world's economies, not the U.S. When you see all of those markets up -- and almost every market is soaring this year -- you should think that Citigroup has a piece of the action because only half of the business is here.

In fact, I would like to think that mortgages and credit cards are the only real problems, and I can't believe that

Capital One

(COF) - Get Capital One Financial Corporation Report


TheStreet Recommends

American Express

(AXP) - Get American Express Company Report



(TGT) - Get Target Corporation Report

-- all of which have seen stability for several months now -- are that much better at issuing cards than Citigroup.

It is true that at some point, 10% to 12% unemployment, we are not going to get the snapback I expect here because defaults will spike again. But it is also true that because Citigroup has less exposure to the U.S., it isn't as cataclysmic as it would be for

Bank of America

(BAC) - Get Bank of America Corp Report

or Wells, both of which are doing well (BAC better than WFC because of WFC's "pick and no pay" portfolio inherited from the feckless lenders at

Golden West


Anyway, if you like Citigroup, you want the market down hard to shake out the

speculators -- and there are many, given the incredible volume -- and get a great basis ahead of when the government starts ringing the register in September. I do not believe you can wait until Sept. 10 to get it; that might be too much like Bank of America at $10.

Only Sheila Bair can stop this now. And I think she runs the risk of ruining her halo if she does.

One more point: There are tons of articles about how Citigroup is losing talent, but you need to consider that of the top 25 people bound by salary restrictions, 23 are still there. The Phibro problem? If it goes away, if the unit leaves Citigroup, that's the end of the problem. It's just a couple of traders, why should they stay?

Again, I am going to hit Citigroup hard over and over.



call on the next leg of this market.

At the time of publication, Cramer was long Wells Fargo and Bank of America.

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