Henry Blodget has a post up at Clusterstock/Business Insider expressing outrage that if CIT goes the bankruptcy route, the "evil vampire squids" at Goldman Sachs will reap a $1 billion payment before taxpayers. To clarify, this is a $1 billion "make-whole" payment (similar to a lump-sum payment, where the borrower pays off all future interest after a bond is called early) and would cover a 20-year deal in which CIT had agreed to pay Goldman about $85 million annually for ten years, according to Bloomberg.
So sayeth Blodget:
The U.S. taxpayer, meanwhile, who should have been entitled to the usual last-in-first-out protection any private investor would have demanded (as Goldman did), will lose $2.3 billion.
Note the key phrase there, in bold (my emphasis). As I commented on the story, no one should be attacking Goldman for exercising prudent lending practices. If there is anyone to be outraged at, its the brain trust at the Treasury for extending rescue financing to CIT without exercising similar prudence.
Of course, I expect the public and the media will largely avoid making this connection, seeing as its much more convenient (and good for ratings, I'm sure they'd claim) to blame Goldman than our public servants. Frankly, I'd like to see the Treasury's explanation for this major and easily-avoided failure to protect taxpayer interests, but I'm far too cynical to expect much, if any, accountability from Secretary Geithner or the Obama administration. This is not a political statement. On the contrary, its based upon past experiences. Since Day 1 the Treasury (etc) has acted hastily, and even foolishly - as this case proves - in their bailout maneuvers.
(Full disclosure: Anal_yst also writes for Zerohedge, but doesn't think Goldman Sachs is evil, Transylvania-based, or cephalopodish.)
This article available online at: