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Jan.18

3:39 PM ET

Friday, 18 Jan 2008

Stop Trading!: Cramer's Stimulus Package

Posted By:Tom Brennan

Sectors:Financial Services

President George W. Bush announced his intentions to pass a stimulus package to boost the U.S. economy, and the market responded with a yawn. So did Cramer.

Bush's plan calls for tax rebates for individuals and couples -- possibly $800 and $1,600, respectively -- and tax incentives for businesses, both of which could total $145 billion. While Americans might enjoy a little extra money, access to petty cash isn't the problem as far as Cramer's concerned.

"It's really just a good boost for Apple [AAPL Loading... () ]. People will buy iPods," he said. "Or maybe it's a bailout for Men's Warehouse."

According to Cramer, it's the collapse of the mortgage and mortgage-backed securities insurers -- like MBIA [MBI Loading... () ], Ambac Financial [ABK Loading... () ], PMI Group [PMI Loading... () ], MGIC [MTG Loading... () ] -- that's hurting the financials so much and causing the paralysis in the market. "I think these are the companies that are the lynchpin of what's wrong," he said.

Cramer offered a plan that called for a government handling of the pre-packaged bankruptcy of these companies and a guarantee of 50 cents on the dollar for all $500 billion in insured loans. Even if every loan defaults -- "which is way, way too negative," Cramer said -- it will take just $250 billion to get the economy moving again.

This and a 100 basis-point rate cut could rally the stock market 2,000 points immediately, he said. Wachovia [WB Loading... () ] and Bank of America [BAC Loading... () ] would go up 15% -- Citigroup [C Loading... () ] would double.

"So my plan's offereing 2,000 on the downside if you don't take it, and 2,000 on the upside if you do," Cramer said. "It's certainly a lot better than trying to write a check to Men's Warehouse."

Jim's charitable trust owns Citigroup.

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