For want of a lousy $6 billion, less than what Goldman-Sachs earned in make-believe net profits in the first 180 days of this year (or, looked at another way, for about
half of what Goldman's going to shell out in just
bonuses to its employees this year--which is
disgusting in light of the
trillions of dollars in government backstops
still supporting its activities), the CIT Group bailout may
collapse over the next few days, despite the recent hoopla about the private sector's so-called (feeble) attempt to support an entity that represents one of the most important sources--if not the most important source--of financing for a good portion of Main Street.
We're talking 300,000 small business--out of the almost one million served by CIT--in jeopardy of closing their doors in coming days or weeks as a result of this "not-too-big-to-fail" mentality being deployed by our government's pretzel logic right now.
That's more
small businesses than the amount of
people that are directly employed by GM and Chrysler, combined. And, most of these small businesses employ a lot more than just one person. In fact, by the government's own definition of a small business, many of these companies employ as many as 500 people.
And, despite what you're hearing to the contrary, it'll be extremely difficult for these small businesses to find alternative sources of financing. We're talking a significant portion of the US apparel, home furnishings, small-franchise (i.e.: Dunkin' Donuts, etc.), industrial equipment and small- to mid-sized manufacturing sectors...gone.
Just last week, 32 retail and trade groups virtually begged Tim Geithner to reconsider his total shunning of this critical Main Street bailout. That's:
American Apparel and Footwear Association
American Fiber Manufacturer's Association
American Home Furnishings Alliance
American Manufacturing Trade Action Coalition
California Fashion Association
Carpet and Rug Institute
Coalition for Affordable and Safe Childrenswear, Inc.
Council of Fashion Designers of America
Craft Yarn Council of America
Fashion Accessories Shippers Association
Fashion Incubator Association
Footwear Distributors and Retailers of America
Gemini Shippers Association
Georgia Traditional Manufacturing Association
Illinois Retail Merchants Association
International Franchise Association
International Sleep Products Association
National Cotton Council
National Council of Chain Restaurants
National Council of Textile Organizations
National Retail Federation
National Textile Association
Retail Industry Leaders Association
Sewn Products Equipment and Suppliers of the Americas
Snowsports Industries Americas
Specialty Graphic Imaging Association
Sporting Goods Manufacturers Association
Southern Textile Association
The Connecticut Retail Merchants Association
The Hosiery Association
US Association of Importers of Textiles and Apparel
United States Industrial Fabrics Institute
Do you understand how many businesses and industries these groups represent? Do people realize how many additional square feet this represents, in terms of retail commercial real estate square footage in this country, alone?
Our government's indicating Main Street's expendable! " See: "Treasury Bets U.S. Financial System Can Weather CIT Collapse."
Businesses are closing their doors due to this, and it isn't even official! See: "Alabama Tool Supplier Blames CIT Woes for Bankruptcy."
Now multiply that times 300,000...
Gone. Do you know what this will do to the unemployment numbers in coming weeks and months? Here's the market's reaction to this "minor problem" this afternoon...
"Most U.S. Stocks Fall as CIT Concern Offsets Bernanke's Remarks."
Most U.S. Stocks Fall as CIT Concern Offsets Bernanke's Remarks
By Matt Townsend
July 21 (Bloomberg) -- Most U.S. stocks fell as concern that a financing deal won't save CIT Group Inc. from collapse offset Federal Reserve Chairman Ben S. Bernanke's assessment that the economy is showing signs of stabilization.
--SNIP--
"CIT is weighing on the market," said Diane Garnick, who helps oversee $391.3 billion as investment strategist at Invesco Ltd. in New York...
Gone...
"CIT Expects Loss of $1.5 Billion, May Seek Bankruptcy."
CIT Expects Loss of $1.5 Billion, May Seek Bankruptcy
By Caroline Salas, Pierre Paulden and Linda Shen
July 21 (Bloomberg) -- CIT Group Inc., the 101-year-old commercial lender seeking to avoid collapse, said it expects to report a loss of more than $1.5 billion for the second quarter and may need to file for bankruptcy if it's unable to tender for notes maturing next month.
CIT's "existing liquidity" isn't enough to repay the $1 billion of floating-rate notes maturing on Aug. 17, the New York-based lender said today in a regulatory filing. CIT, which announced a $3 billion rescue financing from its bondholders yesterday, has asked holders of the August notes to swap their claims for 82.5 cents on the dollar.
"The company is right on the precipice," said Ricardo Kleinbaum, a credit analyst at BNP Paribas SA in New York. "We have a coercive tender where bondholders are being asked to participate and cross their fingers there isn't a bankruptcy down the road. It's not clear what the end game will be."
As I said in another one of my diaries a few days ago:
...if the government's current handling of our "bailouts" is any indication of where we're going over the next couple of years, the only folks left will be WalMart and a few other big box stores, along with those deemed too big to fail on Wall Street, because most of Main Street (those not too big to fail) will be thrown under the bus if they aren't witnessing that occurring to them already.
You see, we're hearing every justification for our government pouring $6 trillion (times two, actually) into Wall Street, but when it comes to putting up $6 billion--less than what Goldman Sachs supposedly made in "profits" in the first six months of 2009--to save 300,000 small businesses, and who knows how many hundreds of thousands if not millions of jobs, it's an issue for which the standard comeback is: "Where do you draw the line?"
And, to that this New Yorker answers, "How about somewhere south of Canal Street in Lower Manhattan?"