Major lender to small businesses opts for prepackaged bankruptcy

Another 2.3 billion wasted by the government.

Geithner "Burned Billions" And Shafted Taxpayers (Again) In CIT

http://www.businessinsider.com/henry-blodget-...

William Black, professor at the University of Missouri-Kansas City School of Law is dumbfounded. "We put ourselves on the hook in a completely inept way where we lose first. We lose entirely as the taxpayers."

Black, a former top federal banking regulator, blames Treasury Secretary Timothy Geithner for negotiating such a bad deal on behalf of the American public.

His argument goes as follows:

The government was in no way obligated to lend the struggling CIT money and, in fact, initially refused to provide it bailout funds. More importantly, being the lender of last resort, the government should have guaranteed we'd be the first to get paid if CIT eventually filed Chapter 11. By failing to do so, "it's like he [Geithner] burned billions of dollars again in government money, our money, gratuitously," says Black.

Black believes the problem stems from regulators' fears that if the banks recognize a loss on the bad assets it will create a domino effect that will wipe out the entire financial system.

"If that's true we've got to get rid of capitalism," he warns, "because if we can't recognize losses in a capitalist system we have no future."

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it was reported by Bloomberg news that while acting as president of the New York Federal Reserve Tim Geithner arranged for Goldman Sachs, Société Générale, and Deutsche Bank to receive full payment on credit default swaps they had purchased -———rather than 40 cents on the dollar insurance giant AIG proposed.

A Fed-run entity called Maiden Lane III was used to shunt these CDOs, which cost American tax payers at least $13 billion dollars at the time. It is currently estimated that due to a decline in value, the total costs for this bank favoritism case cost the American tax payers $35.6 billion total.

To quote Bloomberg:“the deal contributed to the more than $14 billion that over 18 months was handed to Goldman Sachs, whose former chairman, Stephen Friedman, was chairman of the board of directors of the New York Fed when the decision was made.”

----Why should Geithner care? He doesn’t pay taxes.

Another failed government bailout. We would have save billions of tax payers money letting CIT go bankrupt months ago. The Obama administration's futile efforts are costing us money. Its too bad no one in the Obama White House has a clue about how to fix the economy.