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Cramer: What to do with your big bank stocks, Wells Fargo

With the news of Wells Fargo's questionable account-opening tactics this week, many worried investors have asked Jim Cramer what to do with their bank stocks.

"Altogether it feels like banking Armageddon, not long after we were in banking heaven. I say if you own these, just let it play out. Higher rates will come eventually and they will boost the bottom line," the "Mad Money" host said.

Last week, Wells Fargo agreed to pay $185 million in fines after admitting to opening tens of thousands of unauthorized customer accounts. Wells Fargo CEO John Stumpf appeared on "Mad Money" and apologized for the bank's actions on Tuesday, but the stock plummeted for the rest of the week.





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"I can't help but wonder if Wells Fargo thought it was getting off lightly with its $185 million in fines." -Jim Cramer

Stumpf is set to appear on Capitol Hill next week to answer questions surrounding the controversy, and Cramer expects the stock will get hit again.

"It will be ugly, so the stock, which we own for my charitable trust, could come under even more pressure next week," Cramer said.

Bank stocks rallied just a few weeks ago as investors anticipated that the Federal Reserve would raise interest rates as soon as next week. Bank stocks had roared on commentary from Fed Chair Janet Yellen in Jackson Hole and were ripe to fall.

Additionally, the Justice Department is now seeking $14 billion from Deutsche Bank for actions involving the mortgage crisis that stemmed from the Great Recession. Since Deutsche Bank only has an $18 billion market cap, a $14 billion fine would have a significant effect.

"Deutsche Bank's public rebuff of the claim seems ill-advised," Cramer said.

Deutsche Bank may want to avoid paying a fine and may think it's outlandish, but so did Bank of America, JPMorgan and Citigroup, Cramer said. They ended up paying $16.7 billion, $13 billion and $7 billion, respectively, to resolve their legal situations.

"I can't help but wonder if Wells Fargo thought it was getting off lightly with its $185 million in fines, and misjudged the public outcry and the possibility of Justice going after it for wrongdoing, too, something that we heard rumored later in the week," Cramer said.

For investors who have not yet entered the banking group, Cramer recommended a better entry point in the future. There is no need to buy the stocks after the first dip that is inevitable if the Fed does not raise rates next week.

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