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If given the choice, Cramer would choose saving AIG over an interest rate cut from the Federal Reserve.
“I could take a rate increase if they bailout AIG,” Cramer joked to make his point. “That’s how important this is.”
The Fed announced its decision to keep the federal funds rate unchanged at 2% Wednesday afternoon. After an initial reactionary drop in the Dow, the index recovered and is up about 75 points with less than a half hour to go in trading. As much as Cramer had wanted a rate cut, he thinks a failing AIG [AIG
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] would wreck the markets right now in ways interest rates couldn’t.
“It’s the number one institution in the world right now that must be saved,” Cramer said of AIG. “Everything else could go, except for AIG. The markets would freeze and they would not open tomorrow.”
“Every bank would have to raise capital, in the world. Every bank,” he continued. “And there isn’t a dime to be had.”
AIG isn’t a problem only for the U.S., Cramer said, though reports say the government may step in at the last minute. Most of the policies that stand to take down the company are from Europe, where the company went looking for business in 2005, selling products to what Cramer described as bad banks. He said President Bush should reach out to Europe, even to China, and demand they get involved.
Western banks, especially, used AIG for some kind of risk transference, so there’s the potential for big problems if the company fails.
Elsewhere in the market, Goldman Sachs [GS
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] reported earnings today better than Wall Street expected. Still, that hasn’t stopped the negative talk about the investment bank’s overall business. Cramer disagreed, saying Goldman has billions in capital, trades at only 10 times earnings and in the end should have been down a lot more than it was.
“This was a beautiful quarter,” Cramer said.
Jim's charitable trust owns Goldman Sachs.
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