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 Cramer Takes Credit for Fed Rate Cut; Then He Doesn't

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Registration date : 2007-07-01

PostSubject: Cramer Takes Credit for Fed Rate Cut; Then He Doesn't   Sat Aug 18, 2007 2:44 pm

Cramer Takes Credit for Fed Rate Cut; Then He Doesn't (Update1)

By Michael Janofsky

Aug. 17 (Bloomberg) -- Jim Cramer, the CNBC television host who led the howls for the Federal Reserve to cut interest rates, got his wish today.

``They obviously heard us, they acted,'' he said on the air. ``This is the beginning of the run to 14,500.''

The Fed lowered the interest rate on loans to banks by 0.5 percentage point, to 5.75 percent. The surprise action came after weeks of debate between investors looking for looser credit and economists who argued that a rate cut could hasten inflation.

``It's a brilliant move by the Fed,'' Cramer said. ``Two weeks ago when I had my talk with you, they were doing the exact opposite.'' On his show ``Mad Money'' this afternoon, he applauded himself again, saying ``I love to say I told you so,'' adding later, ``I think I nailed it.''

The idea that Cramer or anyone else outside of the Fed would take credit for the Fed's action struck some economists as chutzpah.

``Policy makers can't see themselves as giving in to a crank,'' said Stephen G. Cecchetti, professor of economics at Brandeis University International Business School in Waltham, Massachusetts. ``Maybe Jim Cramer is better informed than they are. I would be shocked.''

Among economists who saw hypocrisy in wealthy investors and Wall Street traders urging speedy Fed intervention -- a turnabout from their usual stance -- was Richard Yamarone, chief economist for Argus Research in New York.

``My mother always told me those who play with fire get burned,'' he said yesterday. ``Here, that apparently doesn't hold true. Someone is making my mother out to be a liar, and that's not a good thing.''

Growing Chorus

Before today's Fed move, Barton Biggs, a former Morgan Stanley strategist who runs the $1.5 billion hedge fund Traxis Partners LLC in New York; Credit Suisse; and Marco Annunziata, chief economist of Unicredit Markets & Investment in London, had joined the chorus.

In an interview yesterday, Biggs said the Fed should lower rates ``pretty soon.''

``People are losing faith in credit, so the economy is seizing up,'' he said. ``That's why it's important that the Fed cut rates and get confidence back in the system.''

Credit Suisse warned in a report two days ago that markets had reached a point between a ``healthy'' correction and the prospect of ``something far more sinister which could lead to real economic distress.''

``If policy makers don't act today in a strong and concerted fashion, we are at risk of seeing the biggest market- driven tightening of global financial conditions in a very long time,'' according to the report.

Bernanke `Nuts'

Annunziata stopped short of calling for interest-rate cuts in his report but said the situation had reached ``a critical crisis'' that ``needs to be cushioned.''

On CNBC two weeks ago, Cramer blasted Fed Chairman Ben S. Bernanke and William Poole, president of the St. Louis district bank, calling them ``nuts'' for leaving interest rates unchanged as global credit was under siege. The segment drew more than 1.6 million hits on YouTube, the video-sharing Web site.

Cramer singled out Poole as being ``shameless'' for favoring a cautious approach and accused Bernanke of having ``no idea how bad it is out there.''

Poole said in an interview Aug. 15 that only ``a calamity'' affecting the economy would justify an interest-rate cut. Poole didn't address Cramer's remarks, and his spokesman, Joe Elstner, said he would have no comment. Michelle Smith, a spokeswoman for the Fed in Washington, declined to comment on Cramer's remarks directed at Bernanke.

Altruistic Motive

Cramer said today that he wasn't seeking interest-rate cuts just for Wall Street investors but also to help average homeowners on the verge of default.

After taking credit on-air for nudging the Fed, he backpedaled.

``It's obvious they didn't listen to me,'' Cramer said in an interview later.

``Things have now happened that make me look good, but it wasn't really my video,'' he said. ``I may be prescient, but I'm not taking a victory lap for something that didn't happen right away.''

To contact the reporter on this story: Michael Janofsky in Los Angeles at mjanofsky@bloomberg.net .
Last Updated: August 17, 2007 18:15 EDT
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