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Obama to Homeowners' Rescue

Prioritizing homeowners over the banks that hold their mortgages might be the morally proper thing to do, Cramer said Monday, but his show’s about money, not morals.

So President-Elect Obama’s move to tighten up the rules regarding the Troubled Asset Relief Program is bitter sweet. The new administration wants to help Americans struggling to make their monthly loan payments and is focused on stopping foreclosures. Great and noble. But at the same time the financials, which Cramer thought were finally stabilizing, have taken a serious hit.

What happened? One of Obama’s top economic advisers, Lawrence Summers, today wrote a letter to Congressional and Senate leaders, saying that participants in the TARP will be forced to limit executive pay, ban most dividends, restrict stock buybacks and forego acquisitions of healthy companies. So it just got harder for some banks to keep their doors open.

You can imagine it’s difficult to recruit talent when there’s no pay incentive to offer. And there’s little reason to invest with Bank of America when it’s sharply decreasing or eliminating its dividend. That’s why Cramer’s a bigger fan of the Citigroup bailout, which benefited both the bank and its shareholders.

It’s not that Cramer doesn’t appreciate what Obama’s trying to do. Treasury Secretary Henry Paulson never came through on his promise to help struggling homeowners, the Mad Money host said, and Obama looks like he will. Those homeowners, and the American taxpayer, are now a priority. But the new TARP rules mean that bank shareholders “should be prepared to be hammered beyond all recognition.”

Now Cramer’s even wondering, with such unfriendliness shown toward the financials, whether Obama will do right by any stockholders at all.

Join Cramer live in the studio for Mad Money: The State of Cramerica, a special town hall-style show on Wednesday, Jan. 21. Get your free tickets here!



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