CIT Bankruptcy Makes Economic Sense.
By Daniel at 14 July, 2009, 12:21 am
US government officials are in advanced talks about aiding CIT Group Inc, one of the country’s primary lenders to small and midsize businesses, people familiar with the matter said.
The discussions are fluid. It remains unclear if a final deal can be brokered and, if so, how expansive it might be.
Yeah yeah. Another company that gets in trouble by writing bad paper, paying zero attention to credit quality. This led to:
CIT customers such as Eddie Bauer Holdings, Filene’s Basement and Kainos Partners, a franchisee of Dunkin’ Donuts, filed for bankruptcy protection.
Right. And CIT took a big loss, because it didn’t pay attention to the basics of credit, and continued to extend loans to companies that could not pay them back.
And what sort of bleating is CIT doing? This sort:
A CIT collapse would put 760 manufacturing clients at risk of failure and “precipitate a crisis” for as many as 300,000 retailers, the New York-based lender said in internal documents obtained by Bloomberg News that make the case for its importance to the US economy. CIT spokesman Curt Ritter declined to comment on the documents.
Let’s cut the game-playing right here and now.
Lending money to people who can’t pay you back is stupid.
Doing so with the EXPECTATION that you can bleat to the government and get bailed out SHOULD BE A FELONY.
Its not like this is new. Bear Stearns, Lehman, GM, Chrysler, AIG, Fannie, Freddie, the list goes on and on and on.
More than one full year after this nonsense started there is absolutely no excuse for any company to come to the government hat in hand like this and cry economic catastrophe if the government doesn’t let it steal from the taxpayers!
CIT, you had more than a year to get off your duff and rein in credit quality. You had more than two years of watching your stock crater, from a high of $61.59 in the early part of 2007 to $1.35 this afternoon.
We cannot, as a nation, keep doing this.
Credit must contract so that only credit-worthy borrowers get credit in the first place.
It’s time for Congress and The American People to put a stop to this madness today.
If that means CIT goes under, then it does. Those customers who are credit-worthy will be able to find additional sources of funds, whether they be their local banks or other lenders.
Those customers who are not credit-worthy must also go out of business.
We cannot clear the economic mess we find ourselves in until we stop the madness of propping up both the imprudent borrower and the imprudent lender, and if we don’t cut out the stupid we will find ourselves in an all-on economic collapse.
The real solution is to let the CITs go and let new banks form that will extend credit to small businesses.
The reality is the big banks will get back to the business of small business lending later on once they realize the mortgage business will never be what it was and this last great refinancing wave will be the end of it for many many years.
Housing will not be speculative for a generation after this mess clears.
Houses will just be homes and home buyers will have to put skin in the game.
Barney Frank trying to get Freddie & Fannie to lower standards even now requires that he should be prosecuted for attempted influence peddling and using his office in a manner that goes against the best interests of this country.
Matt
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