Citizen Cramer

I’m watching the debates, listening to two smart guys try to pretend that a $700 billion intervention in the financial markets and a coming economic crisis doesn’t make all talk of “spending cuts” into a lot of hooey.

“Will somebody come on TV and tell the truth about how bad it is?” - Jim Cramer famously asked this about the fixed-income market crisis on August 6, 2007. If the Feds had listened - at least about the severity of the crisis - hundreds of billions could have been saved.

Since then, Cramer’s been stunningly right. But he started out stunningly wrong. And lately Cramer has been saying that there’s no time for hearings on the Paulson Plan.

Hmm.

Fortunately, in a surprise (imaginary) move, Congress has unanimously appointed me Chairman of the Joint Committee to Fix This Crazy Mess. Here’s a transcript of today’s proceedings, so tap the gavel and steamroll the witnesses along with me, won’t you?:

begin transcript

Chairman Bailey (I - WA) : The committee will come to order…(taps gavel)…order please…thank you…will someone get my good friend from the state of Washington, Mr. McDermott an oxygen mask or something? Calm down, Jim. Thank you.

I want to thank my good friends for reaching across the aisle and between the houses of the Congress and making it possible to convene this hearing in a spirit of bipartisanship and service to the nation. I am honored and even a little surprised to be your Chairman here today.

I want to thank the witnesses for coming on such short notice.

One scheduling note: the presentation by Representative Ron Paul, the Goldkopf Group and the Supreme Islamic Juridical Council of the Ulema on “Why Gold is God’s Chosen Currency and All Fiat Money is ‘Haraam’” has been moved to tomorrow. “Haraam” – did I pronounce that right Congressman Paul? Good. I’m sure it will be a fascinating.

With us now, we are honored to have our first witnesses, Secretary of the Treasury Henry Paulson and Federal Reserve Chairman Ben Bernanke. Thank you, gentlemen, for coming.

P & B: (inaudible)

Chairman Bailey: Be sure and move the microphones quite close to you, gentlemen.

I want to thank the Secretary and the Chairman for their opening statements and in the interest of time I move that these be submitted into the record so that we can proceed with questions.

Without objection?...so ordered.

Mr. Secretary, if I may start with you, it is the committee’s understanding that you are coming to the Congress of the United States, telling us you need seven hundred billion dollars to save the financial system. I assume you would prefer that in cash?

Paulson: (laughs) Um, well…-

Chairman Bailey: “Um, well,” what?

Paulson: (uncomfortable pause) …Well, Mr. Chairman -

Chairman Bailey: Your opening statement and previous testimony also indicate that you purport to require these moneys by….let’s see here…the end of the month. Is that right?

Paulson: The situation is-

Chairman Bailey: Secretary Paulson, approximately what percentage of the President’s fiscal 2007 budget would $700 billion represent – ex supplementals?

Paulson: Um, I guess…*shuffles papers** that would be about 25%.

Chairman Bailey: 25%, that’s right. And Mr. Secretary what percentage of the gross domestic product of the United States of America does $700 billion represent – in round figures?

Paulson: I think it would be about 5%, Mr. Chairman.

Chairman Bailey: Indeed it would. So is it fair to say, then, that you have come to the Congress of the United States telling us that you need an amount equal to 25% of the President’s official FY 2007 budget and FIVE PERCENT OF GDP, so that you, Henry Paulson, can personally save the financial system? Do I have those figures right?

Paulson: Well, the numbers…I mean, our staff will determine-

Chairman Bailey: -Get out.

Paulson: I beg your pardon, Mr. Chairman, I -

Chairman Bailey: Thank you for your testimony, Mr. Secretary. You’ve certainly given us a sense of the magnitude of this problem. Now you may leave.

Paulson: Um-

Chairman Bailey: Busy day, Mr. Secretary, let’s go. The door is over there. Don’t let it hit you on the way out….you lunatic.

(turns to staff)

Guy comes in here, with a straight face: “Can I have 5% of GDP please?” Oh, sure. Maybe you’d like an aircraft carrier with that? Would gray be okay?

Paulson: Ahem -

Chairman Bailey: Can't find the door, or just having trouble fitting your colossal nerve through it? There ya go, Mr. Secretary. Buh-bye.

[Paulson exits]

Now, Chairman Bernanke?

Bernanke: Yes, Mr. Chairman?

Chairman Bailey: Chairman Bernanke, can you draw up a list of the firms that claim to be threatened with bankruptcy unless we give Henry Paulson 5% of our nation’s gross domestic product?

Bernanke: Well, the situation is-

Chairman Bailey: I didn’t ask you about the situation. I asked you about a list. Can you draw up a list of these institutions – the ones that trouble you most?

Bernanke: Yes, I think I can put together-

Chairman Bailey: -Good. Now call those firms and tell them that I want their Chief Financial Officers in my office at nine o’clock Monday morning or they get nothing.

Bernanke: Monday, but these are busy people, and…

Chairman Bailey: -And we’re the American people. Monday at nine. Buh-bye.

(taps gavel)

The committee will stand in recess for thirty minutes.

(taps gavel again, 30 minutes later)

Chairman Bailey: The committee will come to order. Thank you.

I would like to thank our next witness, Mr. James Cramer.

Cramer: THANK YOU MR.-

Chairman Bailey: Whoa! Easy there, tiger. In your case, I think we want to push the microphone a bit farther away. Mr. Cramer, I’m going to ask that your opening statement also be added to the record.

Without objection?...so ordered.

Now Mr. Cramer. You have been very clever and very right about this financial crisis from the time of your – shall we say “passionate exhortation”, of August 6, 2007.

(all laugh)

Cramer: Thank you Mr. Chairman.

Chairman Bailey: But my staff has brought to my attention a broadcast of July 16th that same year – a webcast. In it you said and I quote “if every loan in 2006 that was subprime blew up - $500 billion - if they all blew up – you would still not notice…it has no relevance whatsoever…the tranching is the reason why there’s no impact….this is an issue that people want to really, really, really make a just a gigantic hill out of a molehill.”

Is it fair to say, Mr. Cramer, that you changed your mind about that?

Cramer: (laughs) Yes, Mr. Chairman. Very much so.

Chairman Bailey: In that July broadcast, you mentioned documents pertaining to the Accredited Home Lenders takeover. Do you remember doing that? Short answers here, Mr. Cramer.

Cramer: Yes I do.

Chairman Bailey: As I understand it, you used Accredited Home Lenders as an example of why the subprime issue was NOT going to be a huge problem. You suggested that one of the worst lenders in the country had a single-digit default rate and had issued a fairly small amount of debt relative to the marketplace. Is that a fair restatement?

Cramer: Of my words in July? Yes, Mr. Chairman.

Chairman Bailey: Now in your more famous August 6, 2007 broadcast you mentioned that Accredited Home Lenders document again, did you not?

Cramer: In terms of Fed President Poole, Mr. Chairman?

Chairman Bailey: Exactly, in terms of Fed President Poole. Only three weeks later, talking about the same documents you suggested – very loudly – that Mr. Poole should have more knowledge about this crisis - that he was “a shame” and “shameful” and that “he ought to go and read the Accredited Home Lenders document, at least I read the darn thing!”. I’m sure you remember that. So is it fair to say that in July of 2007 you had one attitude about the facts and figures revealed in the Accredited Home Lenders document and in August of 2007 you had another attitude about these same facts and figures?

Cramer: Well, yes the market-

Chairman Bailey: Did you say “yes”? Your attitude did change? You learned new information that changed your attitude?

Cramer: Yes, the Bear Stearns-

Chairman Bailey: So the answer is “yes”.

Now we are going to look at what changed your attitude, because what you have demonstrated, Mr. Cramer, has not only been rising concern, but an increasing disgust with the conduct of America’s financial community. I feel certain this may have some direct bearing on what kind of bailout will work and what won’t.

Mr. Cramer, in an article appearing on your web site July 29th of this year - again referring to Accredited Home Lenders as well as AIG and others - you wrote:

“The amazing thing about these CDOs is how different they are from the actual mortgage market.…These pieces of paper were simply set up to have tremendous losses if we get even 20% to 30% defaults….ultimately for the worst 2006 vintages, we could reach that because of the massive fraud and overvaluation that took place.”


In that same article, you wrote about: “bogus insurance” and you also wrote:

“Who the heck created stuff that could lose that much on mortgages that aren't defaulting anywhere near that?

The creators are a disgrace.

And they are probably making millions, because Wall Street can be an abject cesspool of ridiculously overpaid talent that has destroyed billions.”


Now you’ve been supportive of Mr. Paulson’s plan, Mr. Cramer. You have disparaged the need for hearings. But Mr. Cramer, when you write about a “disgrace”,
an “abject cesspool” producing “massive fraud,” “overvaluation,” and “bogus insurance,” that suggests to me there is something very rotten at the heart of this financial mess – something we need to have out if we are going to fix this - and that you, Mr. Cramer, have a pretty good idea what that something is.

Mr. Cramer, here is how nations solve these problems: somebody stops trying to be smarter than everyone else; stops worrying about reputation; stops doing his job, playing his role, acting out his part and starts being a citizen. Somebody just tells the truth about how bad it is out there.

Mr. Cramer in July of 1973 a smart lawyer kind of like you appeared before a committee kind of like this and started telling the truth about one of our nation’s greatest national crises. I am going to ask you a question kind of like the one he was famously asked:

Mr. Cramer, what do you know and when did you know it?

Cramer: (inaudible)

end transcript

May you live in interesting times