Sunday, July 19, 2009

Recession Tremors

Do you think the recession is ending? The CIT saga suggests otherwise.

Here’s a rather technical issue on which I have virtually no knowledge and only one opinion: namely, that it sounds important for its broader implications. The topic is the fate of the financial firm or, if you prefer, the bank for small companies, CIT. Consider:

CIT was one of the largest nonbank lenders in the world, a big part of the so-called shadow banking system that collapsed when the global financial crisis erupted last year. It became a bank-holding company to get more than $2 billion from the government's Troubled Asset Relief Program in December. But that hasn't solved its liquidity problems, forcing it to seek more government support.

This report inspires me to ask the following questions:

  1. Assuming this report is correct, what does it imply about the utility of Washington’s controversial bailout of the rich that a company no one ever heard of could get aq $2 billion gift and now be collapsing?

  1. What does it imply about the likelihood that the recession might be ending?

I suggest these questions are important. Anyone have answers?

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