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TheStreet.com TV Recap: Market Will Solve Subprime

The secondary market is getting freer to trade, Cramer says.

Contrary to what some may believe, "there's no subprime slime" in

General Motors

(GM) - Get General Motors Company (GM) Report

, Jim Cramer said on TheStreet.com TV's Wall Street Confidential

Web video Thursday.

The secondary market had become "very hard," but now it's getting "freer to trade," he told Gregg Greenberg, the host of Wall Street Confidential. People need to read the

American Home Mortgage

(AHM)

conference call report to recognize that, but "no one's paying attention to that."

Cramer said he likes to look at

Countrywide Financial

(CFC)

because he considers it the worst of the group. "The stock isn't down at all since the problem was first diagnosed," Cramer said.

What happened here with subprime was a "very classic" occurrence, one he said he's seen repeatedly on Wall Street. "Once everyone knows there's a problem, the problem's solved by the marketplace," Cramer said.

GM and

Capital One Financial

(COF) - Get Capital One Financial Corporation Report

, he said, "were big companies that got surprised by the illiquidity of the market, and they were unwilling to press it." The two couldn't find buyers for their loans, which were marked to market, "so they decided to hold off."

Now market players are waiting for the "collapse" of

Novastar

TheStreet Recommends

(NFI)

, which is the only player left out there, Cramer emphasized. "Then this market will be done because

Fannie Mae

undefined

has decided to become the source of liquidity for the subprime market."

That is the reason he believes both GM's and Countrywide's problems are in the past.

UBS

(UBS) - Get UBS Group AG Report

closed its

Dillon Read hedge fund because it was "unable to tap this market, which had very wide spreads," Cramer explained.

"A lot of times what happens is that you will have a position valued on your sheets, a bond that's valued at $90, but the secondary market requires you to go down to, say, $75," he said. "So a hedge fund will be reluctant to hit that bid because then it would show that they had much bigger losses."

Although Cramer said he doesn't know the specifics of UBS, it's pretty clear to him that "because they tried to sell some stuff when they were marked to market, their returns were much worse." And in end it was just best to close the fund.

But again, he reminded viewers, this was during February and March, both "very different" from the April market, since Fannie Mae's gotten involved.

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for

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