It matters little who's in power in D.C. You can rest assured that whoever is at the helm of the federal government's ship of fools, the big will be bailed out and the little will be allowed to sink unmourned. The latest example is this afternoon's announcement by CIT that the feds have told it to take a hike. No more bailout bucks for one of the nation's largest lenders to small businesses.
I understand that the FDIC was particularly reluctant to extend a helping hand. That's understandable in light of the new primary mission of that agency under the Care Bair to make sure that delinquent homeowners are bailed out first, and damn the consequences to FDIC-insured banks. What's good for the consumer is good for banking, according to Chair Bair, and there's no such thing as a bad subprime borrower. Small businessmen and women, on the other hand, can pound sand and man their own lifeboats. There's no free lunch for those pogues. They made their own beds, etc., etc.
The government's picking interesting winners and losers, isn't it? For example, Goldman Sachs.
While it turned up its nose at CIT, the FDIC bent over backwards to make sure that a bank started by Democratic Sen. Inouye of Hawaii got a helping hand of government TARP capital, after one of the Senator's aides called the FDIC "to check on the status" of the bank's TARP application. Even a left-wing rag like the WAPO couldn't let that one pass unnoticed, even managing to grind out an editorial condemning the apparent conflict. Sen. Inouye's lame response to a fawning Honolulu TV outlet was not convincing ("I didn't do it, an aide did it." "I don't sit on the Banking Committee, therefore how could I have any influence?"). Nevertheless, this little incident has blown by most of the in-the-tank MSM, so don't expect it to go anywhere. Furthermore, compared to Maxine Waters and Barney Frank, Daniel Inouye's a rank amateur when it comes to this stuff, and those two squirrels are still going strong, so Inouye will almost certainly skate away from any consequences other than a reporter's annoying question or two.
Although The Wall Street Journal panned any move to bail out CIT, it's editorial staff had the honesty to point out the injustice of who's been picked to survive and who's been left to die.
Of course, if the feds do let CIT fail, this will only confirm that the only certain survivors in the current market are banks big enough that the government figures it must bail them out. Just ask the many small banks that have been rolled up by the FDIC at a rate of two a week since the beginning of the year, with eight so far in July alone. That can only strengthen the likes of Goldman [Sachs], which apparently needs no help printing money anyway.
Some day, there will be payback. When and how may not appear to be clear at the moment, but having been through these cycles before, I am convinced that "a day will come."
