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Get ahead of the story. That's what we want from someone --


-- from the FDIC, the Treasury, the

Federal Reserve

. Someone has to get ahead of the story.

Instead, we get the opposite. We get reassurances about






, even though they are now not only not helping housing to be affordable, they are making it


affordable, thereby knocking down the commercial banks. The losses are too great at FNM/FRE, so they have no room to buy more mortgages and they are paying up for money, making everyone


pay up for money, as you don't want to buy paper from a bank that is lower coupon than from FNM and FRE. Notice that every time FNM/FRE go up, the banks go down? Today's typical. What a nightmare.

And we get word from the Fed that despite the single most deflationary trend in history, the wipeout of value of the principal asset in individuals' net worth, the major worry is


! You can't make this stuff up. They want to take rates up, which would simply annihilate the only stream of earnings besides ATM fees: the net interest margin of the banks.

It's tough to run a laissez-faire government in a time of crisis. You can't very well be preventive, because that's interventionist. You have to be reactive, because you need events to justify actions. So we get this chronic post-crisis message.

Plus we have powerful individuals in the Fed, like Dallas President Richard Fisher, endlessly warning about inflation, even though the inflation is caused by ethanol/food, oil and steel shortages, with the latter caused by China.

No matter that July gave us the biggest commodity collapse on record, the Fed refuses to recognize the deflationary trend of housing prices because houses aren't in the consumer or producer price indices.

All of this begs the question: We have the biggest crisis in financials since 1932, and the Fed wants to be make money tighter just the course Herbert Hoover recommended to fight the Depression.

Of course all of this was predictable. But it's the philosophy, not just the out-of-touchness of these entities, that is at fault.

Just take the FDIC. Shouldn't it be recommending that we have a Resolution Mortgage Trust as a way to dump the bad loans of the IndyMacs so the rest of the bank can be sold? Do you know they have no ability to sell these banks that they are closing, and they will have to run them? You think they can run 100 banks? You think they even know how to run a bank? No. They should be selling the banks to the banks that didn't screw up, like a

Hudson City


or a


(BBT) - Get Free Report

. But why should those two banks, or any bank for that matter, buy a bank with so many bad loans? They should be setting up a "good bank, bad bank" model and getting ready for private-equity firms to buy whole bad banks.

But all of this kind of thinking implies a change in philosophy from reactive to proactive, and that's just not allowed in a laissez-faire government that extends all the way to the Federal Reserve.

Ironically, what happens now is that their lassitude and indifference and insistence that the government has no role in influencing the market will produce a gigantic tax bill that will then allow the growth of a regulatory behemoth that will dwarf any that might have occurred under a government that was pro-regulation. This moronic strategy is going to produce a regimen of intrusiveness that could hobble capitalism in this country for years.

If Treasury got ahead of things, simply wiped out the common of FNM and FRE, put them in receivership and canceled the dividends of the preferred until FNM and FRE made the money back, you would see a gigantic amount of mortgage money --


mortgage money -- flood the market, as the banks that own FNM and FRE paper could mark it up and lend much more.

Nah, that requires intervention. And intervention is the enemy of this regime. Public enemy No. 1.

To which I say, the next regime will be the most interventionist in history because of these clowns.

Thanks a lot guys, you really have it figured.

At the time of publication, Cramer had no positions in the stocks mentioned.

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