Obama Says No Bailout: CIT Gets Denied
Update: David Faber is reporting that CIT Group will file for Chapter 11 bankruptcy on Friday.
This is outstanding news. I am pleased and I must admit surprised. I wrote just this afternoon all the reasons why the correct decision is to let them fail. Kudos to President Obama for not listening to Treasury and Timmaaay.
Here's what we know: Geithner supported the bailout; Sheila Bair opposed it; no idea if Summers played a role; Obama went with Bair's opinion that CIT Group was unsavable. With $10 billion in new debt needed by the end of 2010 and their portfolio of bowling alleys and strip malls, the fear was it would be another wasted cash infusion. We have already extended CIT $2.3 billion in TARP funds in a precious brainless decision. They should have been denied that time. Paulson and Kashkari, not so smart.
In a brief statement, CIT said, "There is no appreciable likelihood of additional government support being provided over the near term. The Company’s Board of Directors and management, in consultation with its advisors, are evaluating alternatives."
From the Washington Post:
CIT Group, an important lender to smaller companies, said last night that it had failed to persuade the federal government to provide further financial assistance to help it avert a likely bankruptcy filing that could hurt thousands of clients ranging from small clothing manufacturers to retailers such as Dunkin' Donuts and Dell.
The decision, which appears to mark the first time that the Obama administration has denied aid to a large, troubled financial company, reflects the judgment of senior officials that the economy is now strong enough to absorb a painful failure, in part because New York-based CIT is not among the very largest financial firms.
The consequences of a bankruptcy filing still could be severe. CIT provides financing to roughly 1 million companies, many of them already struggling to weather the recession. CIT estimated in its pleas for assistance that thousands of firms might be unable to survive its demise.
Jul 15, 2009 at 10:26 PM
Reader Comments (14)
http://dailybail.com/home/carney-on-cit-group-let-thriving-companies-thrive-and-failin.html
Honestly, it looks like "Sheila Says No Bailout." If, as reported, FDIC was a factor here at all, it was because Treasury planned on doing the same stupid crap as they have been with everything else -- lever up on a little bit of TARP by using the Fed, and then let FDIC (and our bank deposits) take all the risk on both the Fed loans and on any debt the bailed out firm issues. If someone deserves a box of chocolates, it's Sheila Bair (not the boring guy who talks alot).
My sincere hope is that this non-bailout (if that's what it turns out to be) blows up in their faces and the other bailiouts get new scrutiny. It could happen, especially if there's any perceived fallout amongst CIT's former clients.
By the way, THIS is likely why Turbo wouldn't answer Brad Sherman's question the other day about future bailouts -- because Geithner knows he's a bailout punk and will bail out his buddies and their counterparties, no matter how much off your children's and grandchildren's money it takes. He KNEW he wanted to bail out CIT, but maybe he just couldn't be sure how to answer Sherman's question without perjuring himself. (I love this video: http://dailybail.com/home/print-money-thats-how-im-gonna-fix-the-economy.html
The only problem is that if CIT blows up, which it won't, then there would be more pressure to help out the next failure.
I fixed your link for you and removed your corrected link. Also, don't tell me you type in long links...copy/paste is what you meant, right? I would hate to think you type in our long links.
Obama has found out (Bank of America pushing back) that nationalization of the banks requires a full scale invasion reminiscent of Normandy. Obama and his minions must descend on the banks by overnight parachute and glider landings, massive air attacks, naval bombardments, and early morning amphibious landings on all fronts. If the banks are allowed to fall back and regroup, they will fight back and resist the fascist takeover.
Oh, sorry DailyBail, I am being too harsh again. Let me try again, Obama will let CIT fail because it is good for the average American and they don’t pose any systemic risk. I know this because I trust Obama and his fearless administrations and I realize that capitalism has failed. Obama is a good man and only wants the best for us. Government knows best. Government is efficient and effective and will root out all the corruption in the banking system and replace it with sound principles that will better distribute the resources of the financial system to those with the highest need.
And if it doesn't? Do you think this will blow another hole in Too Big To Fail, or is it a non-event?
(Right, and thanks for the fixer-up. I mis-spoke when I said "mis-typed." I don't know how that parenthesis got stuck on the end.)
I thought Paulson & Co. took over the banks back when Shrub was still the Prez? I mean Obama pimped for the bailouts and all, but so did McCain and Bush. Maybe I'm just not getting your point, but how is Obama worse than Bush on this?
http://www.npr.org/templates/story/story.php?storyId=106085208
I'll read that in a minute, but have you seen this interview with the lovely Janet Tavakoli?
http://watch.bnn.ca/#clip193973
It's mostly about Goldman, but she makes the good point that we should "claw back" some of the profits that Wall Street's welfare queens have made over the last few months with huge taxpayer bailout and subsidy. She also says that if more people knew what was going on -- if more people read The Daily Bail -- "we'd be rioting in the streets with pitchforks."
Janet Tavakoli, pitchfork in hand, rioting in the streets -- a latter-day Boudica ( http://en.wikipedia.org/wiki/Boudicca ) -- I'd pay good money to see that.
“Obama deplores Wall Street greed and CEOs who take junkets to the Super Bowl and Las Vegas, even as he serves $100-a-pound beef, flies in his favorite pizza maker from St. Louis, and goes on a lavish "date" with Michelle to New York. Philosopher-kings accept certain protocols for themselves, others for the less sophisticated — knowing that if most people tighten their belts in time of recession such parsimony is good for the country, but it is irrelevant to the occasional indulgences by an all-knowing elite.”
Thanks for the Tavakoli link…She is so smart! I will have to watch it at least five more times to soak in all she has to say.
Interesting that you mention her....I just put a story up 20 minutes ago...it's an opinion piece by Janet herself that she me sent over the weekend.
http://dailybail.com/home/what-wall-street-owes-you-by-janet-tavakoli-for-the-daily-ba.html