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Why The Bailout Is Necessary And Why Jim Cramer Is Right

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Okay folks, stake in the ground time.

One of the biggest proponents I’ve seen so far of the bailout plan so far has been the host of CNBC’s Mad Money, Jim Cramer. The point that he has been making, and many other smart folks I’ve been following, is that the “free market” will not touch this mortgages, even though more than 80% of them are perfectly fine.

Take me for example. I own a house and I pay on time every single month. But right now, if a bank were trying to sell my mortgage, the market wouldn’t touch it because everybody thinks its value would drop. And do know that my mortgage would actually be bundled with 1,000 other mortgages, most of which are perfect fine too.

That’s where the bailout plan comes in. Because where the “free market” won’t act, the government must. Or else we literally risk not having enough money to give average, ordinary citizens at the bank. This is why I’ve been chiding people about mischaracterizing all of these mortgages as bad. THEY AREN’T!

In any event, watch Jim discuss the whole situation and maybe it’ll make you feel a little better about the whole mess…

So then…

We can all keep talking about this is as a “bailout for Wall Street,” but what I really think this represents is the need for more government intervention in free market economics. The market is obviously being irrational right now and simply won’t step in during crisis time. So, in at least that respect, the free market DOES NOT WORK.

The long term question: will we consider nationalizing some of the “fundamentals” of our economy so the cash spigot never has a chance to turn off again?