Top 5 Lies About the Bailout

I think Cramer hit the nail right on the head with his insight on the the Bailout. In other words the critics are full of crap or short the market.

Cramer dispelled what he called the top five "lies" about the Paulson plan.

Critics argue the plan doesn't address the real problem of people losing their homes. Cramer said people are losing their homes because of declining values and foreclosures. Taking out the bad loans, he said, will stop the foreclosures.

Wait until the credit market siezes up. People will be losing more then their homes. There won't be any homes purchased in the US for a few months.

Critics complain the plan costs too much. Cramer said the plan will not cost a lot of money and could even make money. "Paulson will make money for us," he argued.

The costs don't even compare to the potential for damage to this market. Perhaps trillions of dollars in losses to 401K are at stake. A multi-year slowdown might eat 10 times more then the bailout in capital.

Critics say executives of the failing firms will make too much money from the bailout. Cramer argued that there are ways to deal with this issue, such as creating an executive compensation board, or requiring executives to waive their salaries in order to take advantage of the plan.

I like what the co-CEO of Pimco suggested. Allow a giveback compensation like they have in the NFL. You get x-dollars up front and you get the rest of the money if you hit certain goals. Kind of like a signing bonus with built in contract incentives.

The government's pricing of failed loans will force banks to take huge write-downs. Calling this argument ridiculous, Cramer said that the responsible banks have already written down the value of their loans, and the irresponsible ones could easily be given forbearance.

The writedowns will be for the rest of the loans on their balance sheets after they go belly up. The government can pay $700 billion now or trillions later. It is their choice.

Critics argue that there's no need to rush towards a solution to the crisis. Cramer responded, saying "Rome is burning," and citing Washington Mutual's (WM Quote - Cramer on WM - Stock Picks) last debt writedown that occurred Monday night. "We need this deal if only to save Washington Mutual," he said.

This one is just asinine and WaMu won't be the only dead bank come October.