Sprawl Housing Crisis Solution?

Here's an interesting one from Jim Cramer:

U.S. banks are taking a beating in the market because of the billions of dollars in subprime mortgages they have on their books. And with the insurers who backed the loans in danger of going belly up, there doesn’t seem to be a bottom for these stocks. If that ever happened, Cramer said, the entire system would collapse dominoes style.

It’s his ultimate doomsday scenario, and he fully believes it could happen if the government doesn’t act quickly. But instead President Bush announced plans for a stimulus package that would put a small chunk of change into the pockets of American taxpayers. Washington seems to think that consumer spending might be the jumpstart this economy needs.

But Cramer thinks different. And that’s why he laid out his Game Plan for saving the U.S. economy Friday.

The government needs to buy these mortgage insurers – MBIA , PGI Group , MGIC and Ambak – he said. The insurance covering municipal bonds could be sold to Warren Buffett or the highest bidder. Then Washington could guarantee the loans at 50 cents on the dollar. That way, even if all of the whole $500 billion worth defaulted, it would only cost $250 billion to lift the economy out of this rut.

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