I don’t always agree with Jim Cramer but in this case, he’s right. Nobody likes the bailout and I don’t see Wall Street sweating blood yet (that still may come as the economy sags) but the Democrats have added a lot to the initially flawed Paulson plan. Paulson’s royal decree (I am beyond criticism and oversight) is gone, limitations to golden parachutes are gone and Congress is more deeply involved which is good news. The extremist Republicans continue to fight amongst themselves for a touch of theater but without a resolution, retirement money for average Americans will be slaughtered.
People have lost enough already and just holding steady would be a nice place to be compared to the massive hemorrhage experienced during this crisis. The bailout is not going to prevent more bank failures nor will it cure the economic problems created by the Republicans, but it is going to help everyone from hitting rock bottom and an even larger hole to climb out of. I don’t give a damn about Wall Street but I do care about retirement plans that we’re all counting on for our future.
The situation right now is so bad that a little Cramer calculus showed the Dow could drop to as low at 8,378 – a 2,768 decline – if Paulson’s plan doesn’t make it through Congress. That’s why this week’s Game Plan, just like last week’s, is a call to viewers to keep selling their stocks into any strength. Deal or not, we’re still most likely going to see a recession, so you want to preserve capital at all costs. The only thing a congressional agreement really brings us is avoidance of another Great Depression.
Just in case you think this bailout is only about saving Wall Street, think about this: 100 million Americans – about half the adult population – owns stocks directly or indirectly through mutual funds or retirement plans. No deal means your pension fund, 401(k), IRA, 529 college savings all plummet in value. Cramer can’t emphasize enough how important Paulson’s plan is to boost the credit markets – the economy’s fuel – force money back into stocks, bonds and the like, and get economy moving again.
He also goes on about the world economies that are also going down, leaving few untouched and that will present its own set of challenges in addition to our own economic problems. I would disagree with the suggestion that FDIC insurance is raised to $2.5 million (the costs would be outrageous) but surely the Democrats need to raise the $100,000 figure. There’s too much panic out there with everyone checking what’s insured and what’s not insured and moving money. Additional panic and moving money is not what the systems needs right now.
