Game Plan: Dow 8,000?

Cramer’s got a new issue he’s taking up with Washington: FDIC deposit insurance.

The Mad Money host wants the $100,000 limit upped to as much as $2.5 million, with additional protection available at a percentage cost.

Banks runs are taking place under the radar, he said, and this is the best way to stop it.

Even corporate and trust accounts need protection. Chief financial officers, lawyers, the wealthy – they’re all pulling their money from savings accounts and asking for T-bills. As a bank’s deposits evaporate, so too does its ability to lend, i.e., make money. This will continue until Congress agrees on a bailout deal.

“The lack of confidence inspired by Lehman’s demise, the general poor health of many banks, this is going to turn this into an intractable moment,” Cramer said, “if someone in the government doesn’t start pushing for more deposit insurance.”

The FDIC should be pushing Washington for a higher guarantee. Otherwise more and more banks will go out of business, leaving only what Cramer’s calling “superbanks” like JPMorgan Chase, Wells Fargo, US Bancorp and Bank of America.

The situation right now is so bad that a little Cramer calculus showed the Dow could drop to as low at 8,378 – a 2,768 decline – if Paulson’s plan doesn’t make it through Congress. That’s why this week’s Game Plan, just like last week’s, is a call to viewers to keep selling their stocks into any strength. Deal or not, we’re still most likely going to see a recession, so you want to preserve capital at all costs. The only thing a congressional agreement really brings us is avoidance of another Great Depression.

Just in case you think this bailout is only about saving Wall Street, think about this: 100 million Americans – about half the adult population – owns stocks directly or indirectly through mutual funds or retirement plans. No deal means your pension fund, 401(k), IRA, 529 college savings all plummet in value. Cramer can’t emphasize enough how important Paulson’s plan is to boost the credit markets – the economy’s fuel – force money back into stocks, bonds and the like, and get economy moving again.

Even outside the U.S., circumstances are dire. BRIC – Brazil, Russia, India, China – they’re all hurting. Chinese growth has collapsed, India’s inflation is out of control, foreign capital fled Russia when it invaded Georgia, and Brazil, while still a robust market, is a victim of the U.S. slowdown.

“BRIC, which was once the driving force of global economic growth,” Cramer said, “is now an actual brick around the neck of the world economy.”

The industrials, telcos, techs, oils, any company that relies on economic growth, will get hit hard if the Paulson plan falls through.

So “it’s not just the stocks of Wall Street,” Cramer said, “it’s the stocks of Main Street that are about to be crushed.”

Therefore, keep on selling into any strength. Deal or no deal, now’s the time to play defense.

Questions for Cramer?

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