Kate, I saw Cramer ranting about his 'bailout program' and must admit on the surface it actually made some sense. If the mortgage insurers are going to go bust anyway, we will most likely end up paying the price in either case. Funny how the WS guys are floating 'gov't help' when free market capitalism blows up. Here's an amusing post from the AAPL thread...
Regards,
John
CRAMER FOR PRESIDENT!
In the linked post I'm responding to, I said we needed an FDR for President to get us out of the current financial crisis. Sure, Cramer is no FDR. He's barely even Cramer, what with the bleeps, honks, and other assorted sound bites that punctuate his every sentence. He doesn't always do his homework before taking a verbal position, and he's not all that politically astute. But, he has a plan for the current crisis, and by God it sounds like FDR himself.
If you didn't catch his show after Fast Money, try to catch the rerun later tonight. It's worth it. Just in case you miss it, here's the drift.
The mortgage insurers (ABK, MBI, PMI and MGIC) are running out of money. If even one of them goes into default, the market is going to drop 2000 points in the blink of an eye because it knows the broken banks are next, and barring some sort of intervention, it's coming. Rather that some politically involved economic stimulus package for $150B, he would have the fed step in and buy the mortgage insurers before they run out of money, close them and settle the rest of the claims at 50¢ on the dollar. The insurance they've written for municipal bonds could be sold to Warren Buffet and all the toxic mortgage paper auctioned off or processed back into the market in due time. The government would be acting as insurer of last resort and would prevent banks from collapsing under loss of insurance coverage due to the massive mortgage meltdown.
What he didn't say was that at 50¢ on the dollar, the government would stand a pretty good chance of getting most if not all of their money back, while at the same time giving banks the chance to discount to market their pungent paper and maintain solvency.
I think he gets an "A" for cutting through the noise and elucidating a direct solution to a complex, sticky and dangerous problem for which there is no written procedure.
That's why I say:
CRAMER FOR PRESIDENT! |
