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Paulson Foe Endorses Paulson Plan

The Paulson Plan picked up an unusual endorsement last night when Jim Cramer, the bombastic host of CNBC's "Mad Money" and a former Wall Street executive, called for its passage. Cramer's support of the plan is noteworthy because he has been the loudest -- and we mean loudest -- critics of Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson for their handling -- or, in his opinion, the lack thereof -- of the financial crisis.

Last summer, Cramer had his viral 15-minutes when he unleashed a red-faced tirade against the Fed that whipped around the Internet and was met largely with snickering. Today, he looks prescient, having warned that foreclosures were destroying investment bank's balance sheets. "Bernanke's being an academic! It's no time to be an academic!" he shouted.

"He has no idea how bad it is out there! He has no idea! I have talked to the heads of almost every one of these firms in the last 72 hours and he has no idea what it's like out there! None!"

He added, correctly, "These firms are going to go out of business! And they're nuts! They're nuts! They know nothing!...This is a different kind of market and the fed is asleep...We have armageddon!"

For the administration head, he also had a message. "There was a president by the name of Hoover and no one thinks much of him now," said Cramer. "Will somebody come on TV and tell the truth about how bad it is?"

On his show last night, Cramer defended Paulson and Bernanke and noted that it may be the first time he'd ever done so. The conventional wisdom on Capitol Hill is that the point of the bailout is to rid the banks of their toxic assetts so that they can become stable. But that's not the primary purpose, argued Cramer.

Rather, the goal of Paulson's plan is to stem the foreclosures with the purpose of stopping the decline in housing prices. The collapse of the housing market has diminished the value of banks' holdings; reverse that decline and the system works again. Paulson's plan would slow foreclosures, Cramer argued, because the government would be the mortgage holder and could negotiate with the homeowner to help him or her stay in the house. Fewer foreclosures means less housing supply and the eventual bottoming out of the market, which he thinks will come in nine months.

He had kind words for Democratic components of the plan, too, arguing that executives who agree to work with the treasury should agree to work for free in 2009 and that the government should be given an equity stake in companies it bails out.

Cramer also noted that regardless of Paulson's skills at managing the economy, his record as a Wall Street trader is an impressive one. "Paulson knows how to make money," said Cramer, suggesting that Paulson's planned-for $700 billion dive into the market could end up being profitable for the taxpayer. "I'll bank with him."

Here's Cramer losing his mind last summer and earning the right to talk today...