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There are four banks that absolutely cannot go under if the market’s going to get out of this mess, Cramer said during Thursday’s Stop Trading!.
These “Four Horsemen of the Pending Apocalypse,” as he called them, are Merrill Lynch [MER
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], UBS [UBS
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], Washington Mutual [WM
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] and Citigroup [C
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].
These companies “must not be allowed to be shut” down, Cramer said. “They're too important.”
If Bear Stearns [BSC
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] was insolvent, then all four of these banks have “a similar quality to them,” he continued. Cramer re-emphasized his point that clients banking with MER, WM, UBS or C shouldn’t worry since the Federal Reserve already proved it will act to save those accounts. But stockholders, he said, “must be shaking.”
So what’s the plan to keep them afloat? The JPMorgan Chase [JPM
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] buyout of Bear Stearns created a model Cramer said other banks could follow. Wells Fargo [WFC
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] could takeover Washington Mutual, and Merrill Lynch isn’t lacking any potential buyers, either. If the government would buy UBS’s bad debt, that would clear the way for Goldman Sachs [GS
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], which has wanted the Swiss bank’s wealth management business, to step in.
But there isn’t a company big enough to takeover Citigroup, Cramer said, and that’s where sovereign wealth funds come in.
Switching gears to CIT [CIT
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], which is down 16% Thursday after drawing on a $7.3 billion bank line, Cramer called the company’s package of student, mortgage and home-equity loans the “worst single portfolio that I know of other than E*TRADE's [ETFC
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].” CIT needs a “giant infusion of capital,” he said.
Cramer finished the segment reiterating his calls on Nordstrom [JWN
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] and Costco [COST
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] as early-cycle trades. “I continue to believe in that,” he said.
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