Cramer: Madoff Cuffed, but Damage Not Done

When the final numbers come out, scared folks will run to the exits.
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Just what this market needed: the highest profile hedge-fund scandal I may have ever seen -- Bernie Madoff's arrest today. This guy ran $17 billion for the wealthiest of the wealthy and the most clued-in of customers. $17 billion! As my friend Doug Kass says, this one is bigger than Bayou -- heck, bigger than Boesky.

When Boesky got busted, there was an instant backlash by the public against the securities markets -- people figured they were rigged and then they got confirmation.

With the nonsense we see daily with the Exxons and the Chevrons and the JP Morgans and the Goldmans and the last hour of trading with the Pro Ultra ETFs, it is easy to believe that things can be rigged and I believe they are in a bizarrely legal way blessed by the SEC.

But this is obviously different. It's a gigantic Ponzi scheme, he allegedly told his employees, and that means still more billions of dollars that are lost.

Yep, when the size of this is fully revealed, Doug says, it could be $50 billion!

Those kinds of numbers will get bandied about, people will be scared and there will be one more justifiable move to the exits.

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I did not know Madoff. I only knew him as a market-maker on the

Nasdaq

that I didn't use. I didn't even know he managed so much money. It's like he did it all under the radar screen. When it hit the headlines, I just said, "There goes a guy that didn't matter that much."

I was wrong. It's not under the radar screen now. It's a gigantic green mass on the screen and its heading right for the psyche of this frail market.

I just hope for the bulls' sakes that the buyers of

Exxon

(XOM) - Get Report

and

Texas Instruments

(TXN) - Get Report

and

Potash

(POT)

are back in action tomorrow. They will need to be.

At time of publication, Cramer was long JPMorgan and Goldman Sachs.

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