Cramer's Mad Money - AIG: Criminal or Stupid? (3/18/09)

 |  Includes: AIG, BAC, C, FMCC, FNMA, WFC, WM
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday March 18.

AIG (NYSE:AIG), Citigroup (NYSE:C), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), Fannie Mae (FNM), Freddie Mac (FRE)

There have been significant gains on The Street recently, but to consolidate this upturn, Treasury Secretary Tim Geithner needs to show leadership. While Geithner has a formidable task of pacifying irate taxpayers while turning around the crippled banking system, he need not befriend AIG, which should bear the brunt of the criticism for the current mess. Cramer recommends Geithner restore confidence by singling out AIG and separating it from the rest of the financials so Citigroup, Bank of America, Wells Fargo do not become guilty by association. AIG is an anomaly because while other financial companies might have been stupid, AIG’s actions were downright criminal; Cramer believes AIG insured products it couldn’t afford to insure as a way of avoiding capital rules. While Cramer is calling for AIG to be investigated, along with Freddie Mac and Fannie Mae, the main concern right now is to heal the situation.

CEO Interview: David Steiner, Waste Management (WMI)

While according to conventional wisdom, waste management is a recession-resistant business, one part of Waste Management’s company – the commercial construction segment – has been feeling significant pain. However, Steiner says the other businesses have been holding up well, the company has plenty of cash and its 4.5% dividend is safe. Falling commodity prices pose a challenge to Waste Management’s recycling business, but Steiner thinks prices should stabilize. With its extra cash, the company plans more mergers. “There are certainly parts of our business that are more subject to the economy than others,” said Steiner. “Overall we like to think that we’re a pretty good recession-resistant company.” Cramer says he still likes Waste Management.

Bernanke’s Got It

Cramer applauded Ben Bernanke’s aggressive actions toward recovery by providing mortgages at fixed rates of 4%, buying up $300 billion in long-term government bonds and mortgage securities, keeping interest rates low and bringing back the uptick rule. Cramer is hoping Bernanke’s next move is to encourage the SEC to ban UltraShort ETFs. The Dow rallied 91 points on the news of Bernanke’s proposals, and Cramer thinks that thanks to his ex-nemesis Bernanke, his prediction of a bottom in housing by the end of June may come to fruition. While some critics may claim the moves are too radical and the dollar will be weakened, Cramer says such reforms are necessary and a weak dollar might actually be good for American companies that have international exposure.

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