Cramer: Alternatives to Bank Bailout Are Worse

OK then, here are some alternatives to the plan.

1. Let everything go bust, continue to have housing come down, bet that there won't be a series of runs on banks and that the FDIC can dispose of bad loans on a case-by-case basis. I don't think that's worked to date. It will only get worse.

2. Get a modified plan that allows banks that have written down the mortgages to sell them. I don't buy the idea that the other banks will be in a weakened position to handle the new "markdowns," because many of the banks have already marked down prices and the examiners have let them slide. Any modified plan of even a small amount would help. But to just let the mortgages sit there is a very bad move.

3. Bet that we get a big rally and banks can offer equity and get whole again. This is good for Citigroup (STOCK QUOTE: C) and for maybe Wachovia (STOCK QUOTE: WB). I doubt either will do it; they will regard it as too expensive. I don't know who else will do it, but the Zions Bancorp (STOCK QUOTE: ZION) model was a winner. That's what the short-selling ban was partially about. We all hate the short-selling ban, so let's be clear on that.

4. Go the other way, and nationalize the bad banks. This is the Fannie Mae (STOCK QUOTE: FNM) and AIG (STOCK QUOTE: AIG) way. I don't think we want to go this way, taking over all of these institutions. I like the idea of equity being taken in the bad ones, but I don't know if that will sell.