In praise (gasp!) of Jim Cramer
Posted
Sep 25 2008, 06:14 PM
by
Charley Blaine
Rating:
Let me start by stating that CNBC's Jim Cramer can be loud, obnoxious, annoying and even -- as he would admit -- occasionally boorish.
His rant a year ago on how he thought the Federal Reserve was making a horrible mistake when it raised rates in the face of a global credit crunch is the stuff of legend. (Which is why CNBC plays it over and over and over again.)
But Cramer is a very smart guy, and he's offering the best explanation I've seen on why Congress and the White House should pass a financial rescue plan.
The Bush administration -- especially Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke -- are doing a terrible job selling the plan, he says. And he's right. They're explaining it in terms only Wall Street bankers, analysts and economists can understand.
How would Cramer do it?
The plan, he said Wednesday, "is about keeping people in their homes. It's about making sure banks have money to lend "so your kid can go to college."
Indeed, he said, Paulson should be selling the plan as "Invest in America."
Paulson talks about "unfreezing the mortgage market," Cramer said. As an explanation, it's out of touch with the reality that most of us deal with.
"The next time you hear Hank Paulson or any of the plan's defenders talking about the plan freeing up commercial paper," Cramer said, "just insert 'Being able to buy a new car with a loan.'"
The administration should stop talking about "making banks whole from their own mortgage mistakes." Rather, he said, "they should start talking about making sure there will be cash in the ATM when you need money next week."
How serious is the credit crisis? Perhaps Cramer is guilty of big-time hyperbole, but here's what he thinks the stakes are:
"This plan is about averting an economic disaster that would make you have to work two, maybe three jobs so you don't get foreclosed on."
The language the administration is using is awful. "Wall Street gibberish" is Cramer's phrase, and he's right.
If you look at the history of the Great Depression, the single-largest problem was that banks in the United States stopped lending money. To anyone. And the result was a massive contraction of cash out of the economy and a near collapse of economic activity.
When you hear people talk about the credit crunch now, this is what it means: It's hard to get a loan for a house, a car or going to college, or starting a business. Sound familiar?
Hank Paulson is right: If we want to get prevent the economy from falling apart, we need to ensure that banks do their jobs, which is to take in deposits or investable dollars and lend it out again.
Cramer is also right: Paulson and the administration are flunking Salesmanship 101.
Related reading:
Jim Cramer's bad bets
Cramer's flip-flip: I've evolved
Buffett's Goldman deal is great -- for him
The FDR solution: Flashback to the 30s
