If you're looking to put money to work in a bank stock, Jim Cramer thinks there's something you should know.
"It's become pretty darned obvious that large banks, which do more than just lend, simply can't be run right," he said. "They're not only too big to fail, they're too big to manage."
Cramer came to that conclusion after Bank of America suspended its buyback and dividend increase due to an error in the way it calculated how much capital is on its books.
Specifically, the discrepancies stemmed from how that investment bank and brokerage Merrill Lynch had issued. (Bank of America agreed to buy Merrill Lynch in September 2008 and inherited the notes.) As a result it incorrectly reported capital ratios in recent stress tests.
Shares tumbled 6% when the news came out.
"When I first heard the news I almost fell out of my chair," Cramer said. "What was I thinking when my charitable trust bought stock in this company both before and after its latest quarterly report?"
And after reflecting on events, Cramer remembered that Bank of America wasn't the only big bank that's found itself under the microscope after an unanticipated turn of events in far corners of the company.
"Jamie Dimon, the CEO of JP Morgan and one of the smartest guys around, was in a multi-billion dollar loss that couldn't be spotted by the CEO and his top team," Cramer noted.
Meanwhile, involving allegedly fraudulent loans in its Mexico subsidiary. "When I googled the client after the fraud was exposed, I saw a whole history of articles about the company's bedraggled finances," Cramer said.
All told, Cramer can't help but wonder if these big banks have just gotten so big, they can't be managed properly. As a result, he worries that shareholders are at risk of a sudden and unexpected catalyst emerging and wiping out gains in a single session.
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"To me, these problems are now seem endemic, which means no matter how cheap the bank stocks look, and they do look cheap, they simply aren't going to get a decent valuation."
Therefore if you're looking to put money to work in banks, understand that sentiment may be shifting on Wall Street.
"After this Bank of America travesty, I'd think about taking a pass," Cramer said.
Call Cramer: 1-800-743-CNBC
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