Cramer: Lehman's a 'Lurking Black Hole'

Lehman Brothers is renting too much space in the market’s head. The specter of an institutional collapse is weighing on investors up and down Wall Street. A resolution – something, anything – is needed before any peace of mind can be found.

That was Cramer’s message during Thursday’s “Outrage of the Day.” He likened Lehman’s troubles to a “lurking black hole” on par with other crises we’re seeing right now, like General Motors, Ford, Washington Mutual, Citigroup, AIG and, of course, Fannie Mae and Freddie Mac.

“We need to see something happen,” Cramer said. “We need to get it so the big sores are fixed.”

Lehman, already struggling as many banks are with billions of dollars of losses due to mortgage-related investments, got more bad news this week when an intended asset sale fell through and a Citigroup analyst predicted even more write-downs for the company.

Lehman fears it doesn’t have sufficient reserves to cover its potential losses and is looking for ways to raise capital, Reuters reported. But an attempt to sell as much as half of Lehman’s shares to China’s CITIC Securities and state-owned Korea Development Bank failed. (Read: “Lehman's Outlook Darkens As Loss Forecast Rises.”)

Compounding Lehman’s problems, Citigroup analyst Prashant Bhatia increased his third-quarter loss estimate for the bank to $3.25 a share from 41 cents a share, Reuters said. Goldman Sachs and Morgan Stanley also saw their estimates cut, and Bhatia said he expects more mortgage-related write-downs, with Lehman to register the most: $2.9 billion.

“We know there's no real bottom yet in the securities business,” Cramer said. “But it is the day-to-day chaos that needs to be put to rest before we even find anything like terra firma.”

“The SEC gave us a chance to catch our breath by not allowing such a quick demise of institutions at the hands of aggressive shorting that ruins confidence,” he continued, “but that went away.”

“Now it's the dead of summer, with no one around but the shorts to push stocks down. We are staring at the abyss of Lehman.”

“And management fiddles,” Cramer said, “just like Bear” Stearns .

Jim's charitable trust owns Goldman Sachs.

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