Is government the answer to curbing the economic downturn? CNBC’s Jim Cramer advised government intervention in a big way on the July 11 “Today” show on NBC.
“It is – we need giant infusions of capital,” Cramer said of government-sponsored enterprises (GSEs) Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). “So far every time anyone’s put money in or any country’s put money in they’ve become big losers. This is the real problem in the system and it’s all being brought down by housing.”
News of their troubles makes it unlikely Fannie and Freddie will be able to raise “giant infusions of capital” through stock. Cramer proposed a “check” from the taxpayers’ checkbooks.
“The U.S. government should write a check – they should write a $100 billion,” Cramer said on CNBC’s July 11 “Squawk Box.” “[They] wrote a $500-billion check to Iraq. This seems closer to home to me. Maybe that’s a just kind of an ethnocentric view, but give them a hundred bill[ion] and we’re fine.”
Cramer insisted a taxpayer bailout of the two entities would benefit the economy more than a tax cut, claiming tax cuts don’t “do any good.”
“We have a lot of institutions that are teetering, some that are insolvent that are household names,” Cramer said on the July 11 “Today.” “If you cut taxes, that doesn’t do any good. We may actually need a bailout of the largest two entities that help our housing market.”
Cramer made several appearances on NBC, MSNBC and CNBC on July 11, as he is promoting his upcoming primetime special on NBC, “The American Dream with Jim Cramer.” He has also used his appearances to promote his view on Fannie Mae and Freddie Mac.
Not all analysts think the problems facing Fannie and Freddie should be addressed. CNBC’s Michelle Caruso-Cabrera told viewers on CNBC’s July 11 “Power Lunch” Fannie and Freddie have served their purpose.
“I think Fannie and Freddie have actually squeezed out a lot of private enterprises from going out and doing mortgages,” Caruso-Cabrera said. “They buy mortgages and they need to buy mortgages, but now we have a system. There’s plenty of people in the world who want to buy mortgages. Maybe not as this moment, but there will come a time when mortgages are very good quality and people are going to buy them. We don’t need Fannie and Freddie anymore.”