CIT Group: Federal Bailouts for Some, But Not For All

CIT Group, Inc. pulls together a rescue plan to avoid bankruptcy court.  This is at least some good news, whether you know a lot about CIT or not, because when it comes down to it, losing them to bankruptcy will hurt.  It is a long established business, lending to hundreds of thousands of small businesses since 1908.   

I guess, what strikes me most about the news about CIT – why no more government bailout?  The Bush Administration invested $2.3 million of the $700 billion financial bailout in December.  The Obama Administration has denied CIT’s subsequent request for additional help, which is why this rescue plan has developed.

So why bail out some financial groups and not others?  I can understand that the federal government may not want to seem like it just has an endless pot of money for any financial firm in need.  I can understand that there has been public outcries against bailing out one firm after another when the firms use money in ways we do not agree with.  I can also understand that the economy has grown somewhat stronger than it was in the Fall of 2008, and might be able to absorb the impact of a loss of a group like CIT.  

But why make a political statement or example with CIT?  

1) There has already been federal dollars invested. True they came up with their own rescue plan, but is it a band-aid for a bullet wound?  Unless the government is thinking of the money from the $700 Billion as sunk cost, I would really like to know it was properly allocated and had the intended effects on the market.

2) This is not just any company.  They lend to small businesses, something the Obama Administration has been looking to get the government more involved in.  It would seem like it would be a bigger political statement to aid this company during its woes, as its purpose coincides with the goals of the administration.  

3) Because the company deals with small businesses and serves as a middle-person for retailers and suppliers, I believe if this company’s financial rescue plan isn’t sufficient, then it will have a more apparent effect on the lives of Americans than any AIG, Citigroup, etc.  I believe there has been much public outcry from average Americans on bailouts to financial giants simply because people may not understand how AIG being bailed out is going to make it easier for them to find a job, or put food on the table.  I think that there will be a quicker trickle down effect as some Americans rely on small businesses as a means for living, or also because the lives of average Americans is tied closely to the fate of the retail industry.  Americans will definitely feel it if stores have to raise prices because the they have no middle man like CIT to bear the costs of shipments of goods to their facilities.

News about companies on the brink of bankruptcy is a reminder that the economy is not where it needs to be.  I just hope the right decisions are made consistently so that Americans won’t feel the effects of a setback – which is what I think will occur if CIT reaches the point where they must file for bankruptcy.

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