CIT Fails, Fed Loses Billions
(Ernst Moeksis photo.)
Beleagured CIT Group announced over the weekend that it would seek Chapter 11 bankruptcy, eliminating all its equity holders. That means the value of its stock will go to zero— including the $2.3 billion stake held by the U.S. Treasury. So much for socialism.
Wiki's report on CIT shows a long and troubled history, and includes this tidbit: CIT was not qualified to receive TARP funds from the fed, so it reorganized itself as a bank holding company in 2008 in order to get a bailout. And here's another choice maneuver: In April 2009, CIT raised a billion dollars by selling new shares of stock— stock that will soon be worthless. Meanwhile, its CEO, Jeff Peek, earned $5.4 million last year, down from almost $12 million in 2007.
In a Chapter 11 filing, the company (and its bondholders) will survive the bankruptcy proceeding— only its stockholders and other creditors will lose. After these innovative ways of suckering investors, I'd rather see the company disbanded. I am 100% in favor of a corporate death penalty.
the bailouts were surely less socialistic than 19th century railroads, the settlement of most of the continental united states, and the fat cushion of government contracts and research subsidies propping up the aerospace industry.
the banking "collapse" was created by pro-market zealots using innovative ways to create "wealth" and "growth".
Michael Lewis explains why it became popular for many investment banks to issue publicly traded stock: the insiders get rich, and the investors get screwed.
http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom/
William K.Black, a former regulator, explains it took great fraud and willingness to federal willingness to avoid existing regulations that enabled the "meltdown" to occur.
http://www.pbs.org/moyers/journal/04032009/profile.html
the savings and loan bust up was a result of salamon brothers pioneering the mortgage backed security market and suckering/leading the S and L s into participating in it.
About a decade later the wall street geniuses figured out how to do it on a much bigger scale for much bigger bonuses and a much bigger meltdown.
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