Government policy has been inconsistent throughout this whole MESS.
By Daniel at 2 November, 2009, 2:05 pm
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Either help no-one or treat everyone the same.
It handed out TARP money but then what?
Why didn’t they step in here and rearrange the pay order like it did with GM bankruptcy to save our TARP money?
Oh yeah, that was technically illegal but rules could be bent for GM bankruptcy but not CIT’s.
People need to stop blaming the creditors, the bondholders, the investors, and uninsured depositors.
With respect to bondholders whom we later found out that included teachers and police officers, our government made them look greedy and unsympathetic when they were merely protecting their investments.
“Surviving on government loans as it burns through billions a month…”
online.wsj.com/article…
Yes we were giving GM “BILLIONS A MONTH” but these words were in fine prints.
“One of the saddest stories emerging from the GM bankruptcy drama is the plight of “Main Street” bondholders. Most of the investors holding $27 billion in GM debt are big banks and institutional firms, but apparently Mom and Pop-type investors hold about $7 billion in GM bonds.
Unlike the big firms, they’re generally not secured: They can’t demand collateral if GM defaults, and for the most part they didn’t buy financial insurance to hedge against the risk of losses. So in bankruptcy, they go to the back of the line, where they’ll be lucky to recover even a small portion of their investment.”
www.usnews.com/money/b…
Are you kidding me that Paulson, as the former ceo of GS, did not know how to make deals in the best interests of the government investments and made us secured senior bondholders in many of his emergency rescues?
When OTS allowed IndyMac to backdate capital infusion, why should uninsured depositors take the hit?
latimesblogs.latimes.c…
Why did FDIC decide to help GMAC sell another $2.9 billion of bonds just last week via TLGP but not CIT at all?
” All the FDIC had to do was guarantee CIT’s debt, as it had done for many other lenders, and that TARP money would have been safe. And get this – CIT put in for guarantees back in January, but Bair sat on the application and provided no reason why.”
www.cnbc.com/id/32011061
” CIT’s small-business book is largely asset-backed – very different paper than run through the stress test on the biggest banks’ corporate books. Asset-backed paper is secured through a firm’s receivables, making it essentially collateralized lending to handle borrower cash flow… There is no policy rationale to the CIT decision. GMAC got TLGP even though it was in extremis, but CIT apparently still can’t persuade the FDIC to give it up. Is this because we like lenders for autos better than small business?”
www.fedfin.com/index.p…
TLGP was launched to improve lending and Bair used it to help GS raise $20 billion. How much loan servicing to small and mid-size businesses did GS do compared to CIT?
- Papaya
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—CIT’s Bankruptcy HELPS BOND HOLDERS and HURTS TAXPAYERS—
Nov. 2 (Bloomberg) — CIT Group Inc.’s decision to seek court protection probably will keep money flowing to bondholders and 1 million customers of the 101-year-old commercial lender. Shareholders and taxpayers won’t be as fortunate.
CIT’s Chapter 11 bankruptcy may give bondholders new notes at 70 cents on the dollar plus new common stock, and Chief Executive Officer Jeffrey Peek said clients will be able to get funds. Common stock owners could be mostly wiped out, and the U.S. Treasury Department said it won’t recoup much, if any, of the $2.33 billion of taxpayer money that went into CIT, the largest firm to go bankrupt after getting a federal bailout.
“It doesn’t look too good for the government preferred or any preferred holders,” Brian Charles, a debt analyst at New York-based brokerage RW Pressprich & Co., said yesterday. “It’s unlikely common shareholders realize any value.”
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