Paulson’s plan calls for the government to take an equity stake in any company it bails out, much like the 80% stake it took in AIG after providing that company with $85 billion in capital. Cramer’s been a supporter of the plan because these arrangements mean that, instead of taxpayers merely paying for a rescue, they could possibly make money off it.
Instead, because Congress has yet to reach an agreement, JPMorgan and others – Wells Fargo , PNC Financial, US Bancorp – are in good position to swallow up market share as lesser banks collapse.
“They are going to own the world unless we pass the bill,” Cramer said.
“The FDIC is anointing a few banks and making them kings,” he continued, “and giving them the deals of their lifetimes.”
This trend could give rise to four or five superbanks, leaving the market devoid of competition as fear sparks the constant withdrawal of deposits and the failure of many U.S. savings and loans.
“They simply don’t understand the way the markets work,” Cramer said of Congress’ apparent lack of understanding of just how important this legislation is.
The Mad Money host also urged the FDIC to up its guarantee limit to $1 million of $2 million rather than just $100,000, saying the present amount is reminiscent of “ancient days.”
“We need to get more FDIC insurance,” Cramer said, “right now.”
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