So we bailed out AIG but not CIT ?

Joined: 22 Dec 2007 Posts: 461

http://www.bloomberg.com/apps/news?pid=20601103&sid=aAxblWMCEuDg

CIT isn't exactly a bank well know to the public but it does do quite a bit of lending to businesses...tons of them infact.

"The century-old lender that finances about 1 million businesses from Dunkin’ Brands Inc. to Eddie Bauer Holdings Inc. is “continuing to evaluate alternatives” after failing to convince the U.S. government to back its debt, the New York- based company said July 16 in a statement."

One MILLION businesses...this isn't some broom closet in a carribean country here. These are real businesses employing people.

I know obviously obama didn't bail out aig but to give gm some extra billion of dollars and let this slide is just stupid.

Joined: 06 Jul 2003 Posts: 8380 Location: Central CA

NObody is ever going to know what machinations and back room wheeling and dealing go on in this TARP thing... but instead if the "if one, why not the other" meme, I kind of sunscribe to the fact that it should have been none atc all, so your argument gets lost on me.

I don't buy the bullshit story that we need to give them billions of dollars to save jobs... hard to tell whose jobs are being saved when the common classes continue to lose a half million or so jobs a month anyway.

People are tired of the bullshit rhetoric from both Wall Street AND Washington. Maybe somebody is finally starting to realize that.

Joined: 22 Dec 2007 Posts: 461

Well I'm sure they'll be some in the next week or so arguing the same point.

Of course the real argument against bailouts is why would we give money to companies laying off people instead of hiring them?

Joined: 06 Jul 2003 Posts: 8380 Location: Central CA

Exactly. And no company that deliberately moved the majority of it's manufacturing infrastructure (jobs again) to other countries should get any money from the people it stiffed either.

Joined: 26 Aug 2008 Posts: 306

This is kind of a generalization of whats wrong with TARP, coming from someone working in banking and seeing daily whats wrong with TARP and banking in general. TARP was ill conceived, ill thought out, and ill implemented. Without getting into the whole thing of these morons coming up with credit default swaps and the like, and getting bailed out for their greed and idiocy, I'll explain what's going on with TARP, and why in reality it's not working as intended at all.

What's not written about or made public by the media is what the Federal Reserve is running around doing right now, and how it is stiffling our economy. The Fed is running around right now handing out cease and desist orders to banks like they are candy. What they are doing is requiring banks to adhere to new capital to asset ratios. Previously a bank needed to maintain a 5 to 1 ratio to be considered healthy. These morons that got bailed out were running negative ratios. What that meant is that they had more in loans (assets) than they had capital (cash or liquidity) to even come close to backing. The Fed has basically doubled the capital to asset ratios they are requiring banks to be at. One real problem is that the Fed itself hasn't set a solid number on what they want banks to be at. One bank may be at 9 to 1 and get a pass, where the next bank they audit is at 12 to 1 and they hand out a cease and desist order.

Here's why TARP isn't working. Let's first take the batch of banks that recently were allowed to pay back TARP funds. How were they able to do this? It's actually simple. First they had to get their capital to asset ratios in line. There are two ways to do this, either increase capital (bring in new money) or shed assets ( this is done by either dumping loans, which are a banks #1 asset, or by selling off property) Bringing in new capital right now is impossible (anyone want to invest in a new stock offering by a bank?). This leaves shedding assets as the only way to acheive the new ratios. The TARP funds were a instant get out of jail free card for these large banks. It shed them of a ton of bad loans which lowered their assets, and in turn increased their ratios. On top of that is was free capital. Better yet! Suddenly these guys had magical books that showed healthy ratios. Since they are now magically healthy, they could start paying back the TARP funds and get big brother out of their board rooms.

Ok, here's the problem. TARP was intended to get money back into the economy, and get banks lending again. Contrary to popular belief, lending is not happening. I am not talking about housing lending, which in itself is altogether a completely different animal. And contrary to popular belief, home lending has very little to do with moving our economy. The main driving force to our economy is small to medium sized business. They are the ones that make the material for homes, build the homes, rent the equiptment to the construction companies and employ the vast majority of americans. Banks are flat not lending to small business. In fact, as small business loans are maturing, they are kicking these businesses to the curb because they need to shed assets to achieve the new ratios. In the county I live in as example, no banks are currently lending to new business, and are struggling to shed the loans they have. So right now Joe's Oil Change shop might need a loan to purchase some new equiptment, but he has nowhere to go. Sure, he can get a home re-fi, but he can't get a loan to keep his business going. Since Joe can't get a loan, he closes shop and now there's 10 more on the unemployment line. This is happening all across the country right now.

So, TARP money was fed into banks, but none of it ever made it back into the economy. Even if a bank got funds and wanted to give out new loans with those funds, they couldn't. The Fed has made it impossible for any of that money to actually make it bank into the economy.

TARP funds were given to the greedy bastards that got us into this whole mess, never made it back into the economy, and now we have the other banks that were healthy and did things the right way unable to do business because to Fed isn't allowing them to lend. The whole damned thing is a complete mess, and giving more TARP funds to CIT will do nothing but keep them afloat without any benefit to anyone but thier shareholders.

Joined: 22 Dec 2007 Posts: 461

I'm not trying to advocate that cit are/were the smartest in the world but they certainly have more of a influence here then AIG.

Speaking about the reserve they also exempt from FOIA and even today the meetings take awhile to get the minutes out of. Have you ever read Secrets of the Temple (it's not a conspiracy book..) it was written in the 80's by William Greider
http://www.amazon.com/Secrets-Temple-Federal-Reserve-Country/dp/0671675567 One of the major reasons why Greenspan looked so good for so long as what came before him with Volker. Who frankly along with Larry Summers stand out in obamas cabinet...

The ECB is a bit odd too in that it is planning only a handful of large meetings a year I've heard in the form of just a long press conference

I know the banks aren't lending...the odd thing also is another thing they aren't doing and that is selling their excess housing. There's 18-19 million empty homes in the country. Now they aren't all on the market. If banks did put them all on the market it would flood it and it would tank in price (picture if bill gates put all of his microsoft stock for sale...same thing).

It's nearly like making the housing industry like the car industry. If they can't make money off the product they'll try to make money off the finacing of the product. Speaking of gmac they changed too..now called Ally bank with odd commericals with kids
http://www.cnbc.com/id/15840232?video=1169627662&play=1

Joined: 26 Aug 2008 Posts: 306

And CIT is geting help anyway ><

Joined: 08 Jul 2003 Posts: 6309

Calapso nailed it. The whole point of TARP was to get these banks and institutions loaning again and not to ' fix ' their financial woes.

I did hear CIT didn't have a large number of signficant investors or as large as in previous years. I also saw a stat where I saw they were loaning the airlines money.With the oil prices over the last couple of years the airlines and CIT really got forked.

In CITs defense they apparently did alot of fund raising through bonds so it's not like there a big investment bank. CIT be actually might be collateral damage.Should someone of said things like what the heck are you doing airlines with high oil prices/jet fuel costs-YES. Are they too big to fail -NO but are they deserving of TARP under it's original pretext -YES.

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