Good news! Uncle Sam finally found a bankrupt concern which he won’t bail out. Bad news! This firm already has received a $2.3 billion federal bail-out, which means that money is likely to be lost.
It appears that the Obama administration isn’t going to save CIT Group, a “troubled” lender, as they say. Apparently CIT, which specializes in loans for small and middling firms, isn’t big enough to be “to big to fail.”
A bankruptcy filing also could wipe out the $2.3 billion that the Bush administration invested in the company in December as part of the government’s $700 billion financial rescue program. CIT would become the first firm bailed out by the government to subsequently fail.
An administration official said that those concerns were thoroughly discussed but that officials decided the larger problem was the perception that bailouts were available to every troubled firm.
“Even during periods of financial stress, we believe that there is a very high threshold for exceptional government assistance to individual companies,” the Treasury Department said in a statement last night.
Well, fiscal discipline is a good thing. Too bad this decision is coming after roughly $13 trillion in bail-outs. But we’ve got to start some place some time.
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