[GJM] Unstable financial system

[Robert Hahl]

Jim Cramer was the only mainstream pundit I remember saying we could have a financial collapse last summer and he is at it again.

We Need a Plan to Rescue Fannie, Freddie

By Jim Cramer 
RealMoney.com Columnist
7/9/2008 5:15 PM EDT
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No, the market is not prepared for the collapse of Fannie Mae (FNM  - commentary  - Cramer's Take ) and Freddie Mac (FRE  - commentary  - Cramer's Take ). It's not prepared, and it doesn't know what to do. 

 	 

I talk about this endlessly here and on videos on my TV show, about this endless oncoming train wreck. To me, it is imperative that the federal government have an action plan. These are not some nothing private companies that don't matter. Or that can be left for roadkill. 

These are actually too big to fail, even if the equity for them isn't too big. They need to be recapitalized with emergency funding by the government, and the guarantee must be made explicit. Or else we can easily drop very, very big from here, because the departure of these two from the firmament will gridlock the markets in a way that Bear Stearns could never do. 

Understand that these two companies can be taken over with the equity wiped out. 

The issue is, will this government even understand what is happening? 

Last night on "Mad Money," I made a plea to the candidates to address this housing issue, as the Congress failed to act on it. I reiterated that plea in a video today. 

We can handle the collapse of even the biggest banks through the splitoff of good and bad -- like Merrill (MER  - commentary  - Cramer's Take ) talked about today with Wachovia (WB  - commentary  - Cramer's Take ). 

But only the government can save Fannie and Freddie. 

I just hope that Treasury, the Fed and, yes, the man who only knows to talk tax cuts, the president of the United States, get what is about to happen. 

At the time of publication, Cramer had no positions in stocks mentioned. 

Robert W. Hahl, J.D., Ph.D.
Chairman
Kilowatt-Hour Card Corp.
121 S. Lee St.
Falls Church, VA 22046
US +1 7039817447 Call    (mobile)
121rhahl at kilowattcards.com

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