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The Fed's putting pressure on various exchanges to set up a clearinghouse for credit default swaps. That's the "news" this morning. News is in quotes because, first, the exchanges all want to do this, and they have wanted it for months. They need the revenue. Second, we want more than one exchange so there is competition in pricing and we don't want a sweetheart deal by a government so prone to sweetheart deals that I want to vomit every day I come to work.

Third, this is a regulatory issue and it should be done by some superbody -- but please not the easily lobbied- Commodity Futures Trading Commission, which will make you put no margin down because then the fees will be huge from trading. And please not the Securities and Exchange Commission , which doesn't understand markets and has blessed a world where these are under deep cover.

Frankly, as much as I want a clearinghouse on this stuff, I don't think it is possible with these sets of regulators to get a fair one. They are just too easily lobbied by the bad guys to do the wrong thing.

And who would be the worst at this? Tim Geithner and his merry band of "everything we do is right" Federal Reserve folks. I was listening to the TV Thursday and some host was asking some guest how she thought Federal Reserve Chairman Ben Bernanke was doing. She said "he's done a great job." And I found myself thinking, you have to be kidding, you can't possibly believe that, how could anyone think this guy has done a great job?

Anyway, he and Tim "Mr. Let-Me- Call-the-Media-and-Get-a-Good-Story- About-us-Because-I am-Savvy-and-I- Know-How-They-Care-About-the-Call- Back-and-Will-Praise-US" Geithner (long and deserving hyphenated nickname) would be without a doubt the worst two to be involved in this credit default swap market because they don't play dirty and don't know how the game works. One of the reasons we are in such a jam is that SEC Chairman Christopher Cox has huge faith in the market and Bernanke has huge faith in the power of debate with people like Dick Fisher, the totally discredited Texas Fed man who was saying that inflation is the issue and it is out of control as the greatest wave of deflation overwhelms us since 1932. Fisher's an arrogant and erudite one-man wrecking crew of this economy.

If the Fed is pressuring for these exchanges then we are really in trouble.

I wonder if they even realize that Oct. 21, the day of the Lehman reckoning when we give the Wall Street gangsters their pay off on their hit jobs on Lehman, will cause the federally owned AIG ( AIG) to write gigantic checks and will also reveal who guaranteed this stuff. It will most likely be lots of institutions the Fed doesn't understand or doesn't know.

Look, here's what should happen: IntercontinentalExchange ( ICE), NYSE Euronext ( NYX) and CME Group ( CME) should compete. The margin rates should go up huge for anyone who wants to buy this stuff and there should be no more written and the market should be shut down and the SEC should only allow insurance when there is an economic interest. It should be regulated by some untainted organization, a national regulator of financial insurance that has powers to recommend criminal cases to Justice because it should be a crime to take insurance on something you have no economic interest in.

The exchanges should only be used temporarily to get rid of the $60 trillion that's out there and retire it all.

Of course, the government won't do this because it is too interventionist. So we may have to wait until these clowns get booted in November.

They simply aren't sophisticated enough to understand how the Wall Street gangsters work so they are always being bamboozled by them.

Fact of life.

Look, you need a mind from the hedge fund industry to run the SEC, someone who has seen it all and knows how the bad guys work.

Without it, all we will be doing is setting up a clearinghouse for hedge funds to vocally take down the next set of banks and brokers. It is too easy to do, the Kesselschlacht plan lives!

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