CIT Group (NYSE: CIT) has filed for bankruptcy -- which will lead to the wipeout of the United States taxpayers' $2.3 billion "investment" in the company.At least, it was billed as an investment at the time, which it was, in the same way that lending your crack junkie cousin beer money is an investment.
"The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy," Jeffrey M. Peek, CIT's Chairman and CEO, said in a statement. "This market-based solution allows CIT to enter into the reorganization process well-prepared and positioned for a swift emergence."
The company added that all common and preferred stock will be canceled -- which means taxpayers will get literally nothing -- working out to a loss of about $7.50 for every man, woman, and child in America.
But here's what is so messed up about this: The company's bondholders will likely receive 70 cents on the dollar for their debt.
So here's the question every taxpayer -- and every Congressman -- should be demanding of the Treasury Department: Why did we structure our infusion of funds into CIT in such a way that bondholders who invested before the company got into trouble will recover funds at the expense of the taxpayers?
But here's what is so messed up about this: The company's bondholders will likely receive 70 cents on the dollar for their debt.
So here's the question every taxpayer -- and every Congressman -- should be demanding of the Treasury Department: Why did we structure our infusion of funds into CIT in such a way that bondholders who invested before the company got into trouble will recover funds at the expense of the taxpayers?
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Reader Comments (Page 1 of 1)
11-02-2009 @ 11:37AM
LARRYPI said...
You can't be serious with that question. Our elected officials, once again, put it to us (the taxpayers). Why don't we just say NO to their restructuring and force them to sell assets, this would give us some of our money back. Don't say the economy will fail if they go under, this is just more B.S.
11-02-2009 @ 11:51AM
John said...
Just think - if the John Q Taxpayer would have ponied up another infusion of taxpayer money as sought by CIT to keep it afloat, bond holders may well be getting 99 or 100 cents on the dollar to the taxpayers zip. We the people should demand that the regulatory process through bankruptcy be turned into such a nightmare that it drags on for many years. Unless we make an example now out of CIT that screwing over the taxpayer is not the best route, others will follow this same example of pure treachery.
signed
Screwed by fat cats yet again.
11-02-2009 @ 11:53AM
NotKiddin said...
This development further substantiates that "Big business" is too big for governance. Every company has a lifespan, a sunrise and a sunset. Can you think of an exception?
After massive consolidation, entire governments are destabilized and economies are wiped out when returns tumble. This is a new force upon market stability, and the taxpayer can't endure more pressure without having the pressure crush the system altogether. Public healthcare alone will bury the US alive. The health-care package being decided by Congress MAY be granted but will be revoked in piecemeal afterward, due to funding shortfalls in the future. So if you support Obama's health package you will be taxed, and when you get sick in 10 or 15 years, the program will have been canceled.
This is not the old Soviet Union, or even Russia. Russia's bill for downed investments is being passed along to taxpayers in foreign countries in Europe and the United States. They have the taste of blood now. Very Big Business and its monster interests do not benefit the individual but instead prey on them for survival. CIT is only the latest example. None of us can survive this third-party onslaught, conveniently caused by holes of unaccountability.
11-02-2009 @ 12:15PM
NotKiddin said...
I watched your viral video, Mark. Bank robbers dressed in suits. On both sides of the desk.
Cute production!