The world's oldest bank, Italy's Monte dei Paschi could be on the brink of collapse, and Jim Cramer marveled as to why stocks didn't bat an eye at the issue this week.

Monte dei Paschi is the third largest bank in Italy with 169 billion euro in assets, and more than 45 billion euro in debt.

Yet, no one on Wall Street seemed to care about the bank's problems.

"Our banks are now so big with so much capital that the numbers being thrown around out of Europe's ailing financial sector, as large as they are, seem like a drop in the bucket over here," the "Mad Money" host explained.

Cramer categorized Monte dei Paschi as a "zombie bank," and he said it has been for years. The bank has 50 billion euros in non-performing loans, accounting for an astounding 38 percent of its loan book.

"In this country, those numbers would have led to a seizure years ago by even the most brain dead of regulators," Cramer said. "Heck, a bank with 3.8 percent of its loans non-performing is pretty much insolvent. But 38 percent? I mean, please. This one has been a dead duck since 2010, when we first realized the magnitude of the situation."

Cramer speculated that Wall Street didn't care because the Italy has been written off as an unimportant country in Europe. While it has the third-largest bond market in the world, the whole thing is a "yawner," he said.

This was staggering considering that just five years ago, Italy's 10-year bond rates were at 7 percent and the world was glued to every Italian bond auction. Now with its 10-year Treasury rate at 1.82 percent, no one cares, even if the country's banks have 360 billion euros in bad debt overall.

As long as the sovereign debt is insured, individual bank debt attached to the bad loans won't mean as much. People will hurt, and then recovery will begin.

"As we have seen elsewhere, though, the recovery cannot begin until the crunch occurs and the problems are finally dealt with," Cramer said.

Meanwhile, Italy's economy has been faltering for years, and Cramer thinks the real issue is its non-functioning financial system. It's a scary concept to even do business there if you think the bank you're doing business with can go under.

Hence, Cramer thinks a state-run Monte dei Paschi would be a good thing for Italy, except for the individuals that own the bank's debt. Those people will want Italy to leave the European Union, and that could be a good thing.

Germany is the richest and most influential country in the euro zone, but it has been unwilling to help its southern European neighbors. Resurgence in Italian nationalism might for it to spend some money and allow the rest of Europe to grow.

However, in the end, large European banks like Monte, Deutsche Bank or Credit Suisse don't seem big enough to hurt the U.S. anymore.

"That is what happens when responsible regulators demand better balance sheets, which is what we did a long time ago and what the Italians are just beginning to do," Cramer said.

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