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Cramer and New York Gov. Eliot Spitzer agree: Washington’s $168 billion stimulus package does not address the economy’s underlining credit problems.
Gov. Spitzer called the plan, signed by President Bush Wednesday, “an election year waste.” It will put money in Americans’ pockets, which is good he said, but it won’t help the bond insurers at the root of this mess.
The troubled bond insurers – the MBIAs [MBI
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], MGICs [MTG
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], Ambacs [ABK
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] and PMI Groups [PMI
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] – need a capital infusion, Spitzer said. Otherwise they could lose their AAA ratings, causing a “tsunami” of losses in the market.
Spitzer, who testified before Congress Thursday, is involved because insurance is regulated by the state, but he’s adamant the Federal Reserve and Treasury Department should have gotten involved long before this.
“Once again the Fed and Treasury haven’t been as quick off the dime as they should have been,” he said.
Spitzer also agreed with Cramer that money set aside for municipal bond defaults wasn’t used to bail out Wall Street firms that took on too much risk.
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The two former Harvard law school classmates said the problem stemmed from the present administration, which seems to think that any government intervention in the markets is wrong. But as Spitzer said, “The market needs rules. Otherwise you have anarchy.”
Maybe this wouldn’t have happened if Cramer were Treasury secretary, an appointment Spitzer called for during the interview.
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