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Ban Derivatives and US Banks Lose

Tuesday, 15 Jun 2010 | 9:16 PM ET

New financial-regulatory reform that eliminates derivatives trading "would deal a severe blow" to American investment banks, Cramer said on Tuesday. He had thought such a measure would never make it into the impending bill, but a number of media reports show that it might still be alive.

Outrage of the Day
Cramer sounds off on what irked him the most about the markets.

As penned by Senator Blanche Lincoln, D-Ark., Cramer thinks such reform would handicap American companies and effectively hand over business to their foreign rivals. International financial institutions would be able to offer a full range of services to clients that their American counterparts could not. Morgan Stanley, JPMorgan Chase , Bank of America and Goldman Sachs would be hurt immensely, Cramer said.

If such reform were to pass, Cramer predicts Deutsche Bank and Barclays will do particularly well. He thinks DB is a "well-run company" and said Barclays is making strides with its investment-banking business. But he’s not sure Lincoln’s amendment is a done deal. If it were, DB and BCS would be “much, much higher."

Still, Cramer “wouldn’t put anything past this Congress,” especially considering all the political benefits that come with railing against Wall Street right now. So if oversight of derivatives isn’t relegated to the Federal Reserve as Cramer has anticipated, and Senator Lincoln gets her way, Deutsche Bank and Barclays “should be bought aggressively,” he said.

“They will become the new investment-banking kings,” Cramer said.

When this story published, Cramer’s charitable trust owned Bank of America, Goldman Sachs and JPMorgan Chase.

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