Cramer: The Truth Hurts Citi

Were investors misled about Citigroup ( C) after the company failed its Federal Reserve stress test? After being misled by Citi executives Jim Cramer is unclear as to what the bank's franchise is.

But one thing is - it's not what he thought it was.

"They lead us to believe, no one will ever admit this, but lead us to believe things were really good at the bank. They have 65% international, so you think that they wouldn't be levered to the bad part here. They have been very slow, although they will tell you very fast, in getting rid of Citi holdings. They were a very mismanaged bank and the fact that they weren't allowed (to fail) and Bank of America was says, you know what? They don't have what it takes," Cramer said.

He said they may still be a factor in the international arena and some U.S. cities, but at a time when that market is weak. The company has also been in trouble with the government and Cramer said internal controls are weak. He is also concerned that the bank is in denial of these issues.

"The fact that they would deny everything I just said meaning they would just be in a fairy tale world is very disappointing. And the fact that I had thought I had gotten into a very good relationship with Vikram, thought that I really knew the bank. However, the Federal Reserve knows it, I don't," Cramer said.

Cramer said the Citi's stock still could rise but preferred Sun Trust Bank ( STI), which he bought this morning. The company also failed the Fed's stress test but Cramer said the company is still a regional powerhouse, capable of taking share away from Bank of America.

"You know I thought Sun Trust somewhat had to fail. Atlanta is a very bad housing market. And Sun Trust made some serious mistakes but Sun Trust has a very serious intact franchise," Cramer said. "I don't know what the Citi franchise is. See, that's the problem. I don't know what it is. I know what it isn't. It's not what they were saying it was. And that was very brutal let down."
At the time of publication, Cramer was long XXX.