A few months back, as part of a Tin Foil Hat Production, I mentioned CIT’s desperate need for funds and the Fed’s decision not to bail them out. Why is this noteworthy? After all, I don’t believe the Fed should bail anybody out. I cheer wildly to see Ford record surprising profits while competing against the Frankenstein creation that is GM, just as I quietly root for GM’s justified demise. But here we are, with CIT declaring bankruptcy and the hypocrisy is just too much. Apparently, a company focused on financing small business (70% of the entire factoring business!) is not worth a bail out from the administration that claims to look for ways to spur Small Business. Color me cynical, but I think CIT’s main problem was a lack of Goldman-Sach’s alumni on its board…
daniel says:
We the taxpayers already spent 2.3 billion bailing out CIT and it merely delayed the inevitable by 300 or so days. It looks like it was money we may not get back. Government Motors may turn out the same way – I hope they make it back into the black so we can get paid back, but it would have been more prudent not to risk our money in such wild speculations.
November 2, 2009 — 12:43 pm
Michael Patton says:
Remember the campaign slogan – “a chicken in every pot”?
I think we’re headed to the levelling of the playing field with these future moves:
1. If you’ve got a mortgage – govt will simply wipe it out.
2. If you’re a renter – we’ll have a lottery to see “which of the vacant homes” you win.
3. A Buick for every registered Democrat and a Chrysler for every registered Republican (in the belief that having been on the winning side of the election is worth a better “bribe”… er’ I mean car).
How do we pay for all this? We simply “nationalize” everything the way other “Banana Republics” have done for the past 100 years.
PS: just dawned on me – all the jobs that will be created… after all if you don’t have a mortgage or rent payment any longer you’ll have disposabal income to buy a whole new supply of foreign made goods… and they’ll all need delivered and stocked on some stores shelves (Headline – DRIVERS and STOCKMEN jobs go begging!)
November 2, 2009 — 1:12 pm
Don Reedy says:
Sean, it’s never about small. It’s always about BIG.
400 years ago we left King George and his noblemen, proud and sure of our ability to run a country based on the rights of all. Today, dressed in different attire, the aristocracy of Wall Street, with the Congress as their footstools, march onward toward reclaiming the crown.
Sean, this is guerrilla warfare, fought by the ruling class (yes, the ruling class), in an increasing successful campaign to win back the throne for themselves.
November 2, 2009 — 3:03 pm
@TeriLussier says:
Ford’s gains are hardly surprising, Sean. After all, Ford twitters. http://bit.ly/jtxW6 😀
November 2, 2009 — 3:05 pm
Sean Purcell says:
Daniel – I agree with you. My pointing out hypocrisy in the government sounds more and more like Captain Renault: “I’m shocked, shocked to find that gambling is going on here.”
Don – I think you give too much credit to Wall Street and too little to the government but that is a discussion for another time. I comment now to disagree with “increasingly successful.” I believe it is only temporarily successful. We have a secret weapon – two, actually. I’m writing my next post on this very topic. Stay tuned…
November 2, 2009 — 3:43 pm
James Boyer says:
A few years back I had a client who was at the the time a Junior VP at Citi. His ethics were very questionable, and his attitude to anyone who worked for him was even more unethical. That same person, from what I have seen, managed to get himself promoted into the executive management of Citi and I believe he is still there today. To me that speaks to the ethics of the company as well as other things I have seen and heard about the company through the years.
From what I have seen, heard, and experienced, they got what they deserved!!
As to GM they were once the greatest manufacturing company on earth, I believe with the proper leadership they could return to something close to that status. The already have some of the most competitive products. If i were to root against a car company I would root against Toyota, Hyundi, Nissan, …
November 2, 2009 — 3:49 pm
Sean Purcell says:
James,
CIT, not Citi. You are right about Citi though. Thanks to her connections (through Rubin and the Treasury and… well, will you look at that: Goldman Sachs) she got exacty what she deserved: a bail out so nice we bought her twice!
By the way, in your last paragraph you’re naming car companies. I don’t have anything against car companies and even if I shared a protectionist fervor against Toyota, Hyundi, Nissan, etc. I wouldn’t openly root against them. No, I’m rooting against a government run “private company.” Now there’s an oxymoron if ever I’ve seen one.
November 2, 2009 — 4:15 pm
James Boyer says:
Sean,
I still don’t want to root against GM. After all Toyota, Nissan, Hyundi, have gotten their share of government handouts, USA and other governments so their hands are not exactly clean in this respect. There is an argument that could be made that without the vast subsidies that Toyota got over the past 50 or so years, it could never have grown to what they are today.
November 2, 2009 — 5:02 pm
Ashlee says:
I also hate to see GM go down. They seem to be doing ok after their bailout. Everybody wants to dog them bc Ford didnt get bailed out. If Ford would have been bailed out also, where would we be?
November 2, 2009 — 6:35 pm
Sean Purcell says:
James – Fair enough. I guess I’m drawing a line in the sand between subsidies/handouts (government intrusion) and downright government ownership. I don’t want to see either (although the former is pretty much impossible to get rid of unless – until – the entire system collapses) but I am especially keen to see governemnt owned business fail at every step. I’m currently focusing on GM.
November 2, 2009 — 7:20 pm
Sean Purcell says:
Ashlee – They seem to be doing ok after their bailout.
That’s kind of like saying Uncle Jeb is doing OK now that the doctors have removed his organs and stuck tubes up every orifice to keep him alive (alive being a relative thing at that point).
The point is: Ford DID NOT receive a bailout – nor need one. What’s the point of capitalism if the winners (the ones who do it right) aren’t rewarded? There is none. Instead we end up with the 3rd grade equivalent of “Everyone tried their best so you all get a medal!” That’s also known as socialism.
Let me make up an eerie example I’m sure will hit home: Imagine if you had saved your money, bought a modest house within your means and had the foresight to lock in a 30 year loan with payments you could afford even if one member of your household lost their job. Then some slacker comes along and buys the house next door to you. It’s way beyond his means and the only reason he gets in at all is because he got one of those loans with a made up interest rate based on made up income. Then imagine that your neighbor ends up right where you knew he would: defaulting on this home he can’t afford. Pretty good learning opportunity for your children – but wait! He gets to stay in his house and he ends up with a rate 2 points lower than yours! Why? Because he took no responsibility and got bailed out by… you, actually.
Oh wait… that’s actually happening. Never mind.
November 2, 2009 — 7:45 pm
David Losh says:
You lost me on the buying a modest house within your means, but small business is one of my areas.
I was waiting to order some L metal to make a skate board box for my son. The guy before me had a long list of items he was buying, enough for a fenced enclosure on a front patio. His total purchase price was $328 for the materials to fabricate this wrought iron fence.
OK he gets done and the guy at the counter introduces us. The guy goes into his song and dance about how no one will give him a bank loan so he can’t grow his business. I said, what he could do, is do what my company does, and ask for 30% up front, 30% at the mid point of the job, and 30% on completion. 10% is held at the end for any defect the customer wants to discuss as the sole recourse.
Also in his neighborhood window bars, decorative window bars would be a big seller.
So in the span of the forty minutes we talked the guy went from needing a bank loan to being self financed.
He was also talking about equipment he needed and I told him about a place that had gone out of business that couldn’t sell the equipment because no one wanted to pay for it. The guy at the counter agreed and we both suggested another company where he could probably rent shop time.
I am an offender myself. I ran my business on credit for twenty years and a year ago I thought my life was over because my lines of credit were closed. It took me a year to get to full cash, but it worked.
The government was right to step in when they did. Now it’s up to us to figure out how to fly low, below the radar, and accumulate as much as we can.
November 2, 2009 — 9:39 pm
Thomas Johnson says:
@David: If you take all cash with a client, there is no IRS electron paper trail either, Just sayin’.
November 3, 2009 — 7:20 am
Sean Purcell says:
David – Your comment is the very essence of what will save our economy and quite possibly our democracy. As Greg Swann often points out, the desire for freedom, individualism and economic freedom runs in the heart of all mankind. No where has it found more expression than here and I just don’t think that genie can be put back in the bottle no matter how hard the neo-progressives try.
While the ongoing experiment is exercised by the powers that be, however, I agree with you 100% on flying below the radar. Might even want to stock up on Ebay dollars. 🙂
November 3, 2009 — 8:41 am