Skip to main content TV Recap: Off-Balance-Sheet Risks

Cramer looks at Citigroup's bailout of its structured investment vehicles.

Any time there are off-balance-sheet obligations that aren't easily accessible when looking at a company's financials, like


(C) - Get Citigroup Inc. Report

seven troubled structured investment vehicles, it can be an Enron-esque situation, Jim Cramer said on TV's Wall Street Confidential Web video Friday.

This is what Enron did with the Raptor portfolio, "which was really just a lot of obligations that you didn't realize," he explained. The seven SIVs were always Citigroup's obligations, and Cramer said he doesn't understand why they were able to be kept off-balance sheet in the first place. "It seems like the accounting profession just routinely lets us down," he said.

Cramer: Citi's Enron-esqe Black Hole

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Richard Bove, a financial strategist at Punk Ziegel & Co., says Citigroup is not going to have to cut its dividend, but Cramer doesn't know how that will be possible. Cramer said Citigroup, which he owns for his charitable trust,

Action Alerts PLUS, is his "biggest disappointment this year."

Cramer said he feels very strongly that Citigroup CEO Vikram Pandit can undo everything that was brought in by former CEO Chuck Prince, "but he would have to first undo the ridiculous hedge fund acquisition that brought Pandit in."

The triple-A ratings Citi's SIVs have "are a meaningless concept" because the ratings agencies didn't really focus on what they put triple-A ratings on, he said, and the defaults on triple-A paper are running very high. "We see that from



, although it's not self-evident," Cramer said.

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"What happens is triple-A paper is reduced to a very low level piece of paper, although the ratings' agencies don't seem to understand this, when you attach a home-equity line of credit to it," he explained. If he could see exactly how much second lien mortgages the SIVs have against them, Cramer said he would be able to tell people how bad it was.

But the fact that he doesn't know this information is why calls Citigroup a black hole.

"I'm very jaundiced about everything I hear about the mortgage market because it all comes down to one thing: If housing prices go up, we're fine; if housing prices go down, it doesn't matter what the government does, it doesn't matter what the


does, short of cutting interest rates," Cramer said. "We have to make it so people want to buy a home again, and there isn't anything that's being done to make that happen."

At the time of publication, Cramer was long Citigroup.

Jim Cramer is a director and co-founder of He contributes daily market commentary for's sites and serves as an adviser to the company's CEO. Outside contributing columnists for and, 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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