Cramer's Stop Trading! Will the Banks Be Nationalized? (1/15/09)

Stocks discussed on Jim Cramer's Stop Trading! TV program, Thursday January 15.

Citigroup (C), Bank of America (BAC), JP Morgan Chase (JPM), UltraShort Financials ProShares (SKF), AIG (AIG), Fannie Mae (FNM), Freddie Mac (FRE)

On news that Bank of America needs another bailout and Citigroup’s lackluster numbers, financials took a hit, even JP Morgan which reported a better than expected quarter. Ultrashort Financials ProShares (an ETF Cramer disagrees with owning but uses as a barometer) shows increased activity. Cramer urges investors not to panic and doesn’t think receiving TARP funds constitutes a government takeover or other measures similar to those taken to save Fannie Mae, Freddie Mac and AIG. He would sit tight and avoid panicking over financials

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Comments

[Ishortyou:]

the are already indirectly nationalized with preferred stocks and warrants and other conditons.

Jan 16 09:43 AM

[bernie 1:]

Isn't it amazing that President Reagan spent billions & billions to destroy Communism in Russia without ever firing a shot. Now our government is spending Trillions to bring Communism, O.K. Socialism to the United States.
Doesn't anybody out there think that if we the investor were offered 10-11% for guaranteed preferred shares that our wonderful country that is the reason Capitalism is the envy of the entire world, except maybe Cuba & North Korea would have paid for mistakes banks & insurance companies made. Of course nobody remembers (especially in Washington) the phrase Redlining that forced these companies to give loans & mortgages to people who should never have been in their own home in the first place? Politicians truly have the shortest memory in our history.
Capitalist or Socialist, what would you rather have in America?
Bernie

Jan 16 10:43 AM

[joes:]

The argument between socialism and capitalism is invalid as there is clearly a hybrid combination of the two philosophies in the US and most other countries. Reagan was the leader of the obviously flawed theory that free markets self correct, Freidmann and Greenspan were put in charge of creating the largest ponzi scheme allowing bank managers to get paid as laws created more automatic payments through 401K's and pension funds.

No body forced people to give loans, no one removed the fiscal responsibilities of the lenders, the lack of regulation unleased the dogs and now they have picked our bones.

Jan 16 12:07 PM

[Phil Trupp:]

Earlier this week I reported that "too big to fail" has already failed and is on the way out. Today (1/16) both the New York TIMES and the Washington POST confirmed that limiting the size of banks, along with strict oversight of mutual and hedge funds, is a top priority of the Obama economic team.

Steven Schrage, the Scholl Chair in International Business at the Center for Strategic and International Studies, says all indications point to "a clear sign that the new administration is going to push for a major overhaul, for major structural reforms." Government regulators may be inserted into banking board rooms.

Among other reforms will be strict oversight of the of financial products sold by hedge and mutual funds. To limit the size and scope, banks may be prohibited from managing private-equity or hedge funds. And, according to Volker sources, bank deposits should not be concentrated in the hands of too few banks.

"Keep them small, so that any failure won't have systematic important," Volker said at a news conference yesterday. Volker--known as the "enforcer" in Washington circles--said today's financial system is "broken."

"It's a four-letter word," he said. "It's a mess."

Meanwhile, Scott Talbot, senior vice president of government affairs for the Financial Services Roundtable, which represents the largest U.S. financial institutions, half-heartedly agreed that more and better regulation is needed. "But at the same time," he added, "you don't want to stifle innovation, creativity or the allocation of resources to take appropriate risks." Given the state of the current economy, one can't help wondering if Mr. Talbot has given much thought to the dangers of hyper-leveraging and the criminally toxic mortgage securitization of the past few years.

Jan 16 02:54 PM

[Calif Big Dog:]

If nobody can figure why we are in this mess and you really want to know who caused this? Look up Clinton story on Fannie Mae Credit requirements. Google New York Times 9/20/1999 They even understood then, this would happen! The most liberal paper in the U.S.
called it. as did MC Cain
Barney Franks,Chris Dodd,Pelousi, Clinton's all are the problem


On Jan 16 10:43 AM bernie 1 wrote:

> Isn't it amazing that President Reagan spent billions & billions
> to destroy Communism in Russia without ever firing a shot. Now our
> government is spending Trillions to bring Communism, O.K. Socialism
> to the United States.
> Doesn't anybody out there think that if we the investor were offered
> 10-11% for guaranteed preferred shares that our wonderful country
> that is the reason Capitalism is the envy of the entire world, except
> maybe Cuba & North Korea would have paid for mistakes banks &
> insurance companies made. Of course nobody remembers (especially
> in Washington) the phrase Redlining that forced these companies to
> give loans & mortgages to people who should never have been in
> their own home in the first place? Politicians truly have the shortest
> memory in our history.
> Capitalist or Socialist, what would you rather have in America?
>
> Bernie

Jan 16 08:22 PM

[PeteK:]

Ca. Big Dog:
You are right on the button.
Thanks for pointing it out.

Jan 17 03:42 PM

[Surfer1104:]

What else should we expect. We have Wallstreet running the Whitehouse. We have Goldman Sacks executives all becomming politicans. The elitists of society will now convince us that big government is the only route to ending our problems. The politicans will tax us and divide our weath among the masses. Sounds to me like Carl Marx 101..

Jan 17 04:24 PM

[PeteK:]

Bernie 1;
You need to study more about the
american history during the last 30 years.
To make political comments like that is nonsense.
More like bias personal views.

Jan 17 04:29 PM

[naro:]

Let the banks fail. Form a federal lending agency to provide loans to business, until new banks are created from the carcasses. The banks gambled on mortgage instruments and derivatives and lost big. Let them fail because of their stupidity, and use the bailout money to lend directly to businesses.

Jan 17 06:30 PM

[Jake Berzon:]

Banks that are not solvent should not be kept on governmental life support, funded by taxpayer dollars.

Jan 17 11:12 PM

[Mortgage In...:]

joes, you obviously don't understand that we do not live in a free market society as Reagan believed in. Without congressional intervention in the credit markets (specifically creating the CRA and forcing lenders to make loans to unqualified borrowers), we wouldn't be in the mortgage mess we're in. A free market DOES work, but the Democrats in congress won't leave it alone. Now, instead of realizing (or admitting) their own mistake, they instead are intervening again to try to fix it. We should have let the banks collapse and deal with the catastrophe that would result. It would have been a disaster, but would have RELATIVELY "quickly" corrected itself, just as a true free market does EVERY time. By "relatively" I mean that it will fix itself faster than the current mess we've created will.

Also, I don't recall any lenders dragging borrowers to the closing table with one arm behind their back. The blame goes to the individuals who borrowed beyond their means, not the banks offering the loans. Take some responsibility for your own actions and don't blame the banks. Just because something can be had (a mortgage loan with $0 down and bad credit) doesn't mean you have to take it. You can't legislate individual stupidity. And stupid people make stupid mistakes. Unfortunately, they also can vote!



On Jan 16 12:07 PM joes wrote:

> The argument between socialism and capitalism is invalid as there
> is clearly a hybrid combination of the two philosophies in the US
> and most other countries. Reagan was the leader of the obviously
> flawed theory that free markets self correct, Freidmann and Greenspan
> were put in charge of creating the largest ponzi scheme allowing
> bank managers to get paid as laws created more automatic payments
> through 401K's and pension funds.
>
> No body forced people to give loans, no one removed the fiscal responsibilities
> of the lenders, the lack of regulation unleased the dogs and now
> they have picked our bones.

Jan 18 01:15 AM