CIT Hanging on By Thread, US Considers Bailout

The Treasury and Fed, however, are more interested in coming to CIT's aid, according to the WSJ. US government officials are in advanced talks with the lender to provide some sort of aid. Although CIT is not viewed as a systemic risk to the market, CIT has loans to nearly one million small businesses. Government officials believe that CIT's failure could have many unforeseen consequences.

What's sort of interesting about the fact that the government still wants to bail out a lender that is not a systemic risk to the economy? Certainly there are unforeseen circumstances if the lender were to collapse. There are always unforeseen circumstances, but why does the government care enough? I'm not one to start conspiracy theories, but since this one is already out in the open, I might as well come right out and say it: Goldman Sachs extended CIT a $3 billion loan.

In today's earnings announcement the investment bank claims it has no exposure. It is hedged. Please refer to transcript related to AIG government bailout. But it would certainly be very convenient if the government bailed out yet another company that owed GS billions of dollars. Wouldn't it?

By Mock The Market