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The CEO That Got Mortgages Right

There are some games you only win by not playing, Annaly Capital Management CEO Mike Farrell told Cramer Wednesday.

Annaly managed to sidestep the mortgage mess in which big banks and brokerages like Washington Mutual , Citigroup and Bear Stearns found themselves. Farrell credited his company's 30 years in mortgages for the strategic insight.

There was just too much wealth creation through affordable mortgages in 2003-2004, Farrell said, "and that stuff just never lasts." He equated this dilution of underwriting standards to that of the dot-com bubble.

Strange then, Cramer noted, that no one else -- none of the companies overexposed to mortgage-backed securities or the Federal Reserve -- saw the meltdown coming.

Farrell was quick to come to the central bank's defense, though. Even under previous Chairman Alan Greenspan, the Federal Open Market Committee was trying to pop the housing bubble. But the financial engineering taking place in mortgages was simply beyond the Fed's reach.

Now, Annaly enjoys the confidence of holding only Fannie Mae's and Freddie Mac's government-backed paper. And since Farrell isn't struggling to raise cash just to stay afloat, his company can take advantage of what he described as "very powerful" fundamentals to re-enter the market while competitors can't.

Annaly's definitely still a buy as far as Cramer's concerned.

"It is the way to play this environment," he said. "There is no doubt in my mind."

Jim's charitable trust owns Citigroup.

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