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CIT: Another Sunday Bankruptcy and Goldman Profitpalooza?

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Joanne98 Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-01-09 04:14 PM
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CIT: Another Sunday Bankruptcy and Goldman Profitpalooza?

CNBC reported small business lender CIT will enter prepackaged bankruptcy this Sunday. CIT's stock is down 15%. Will Goldman Sachs get their $1 billion payment when CIT officially implodes? Will it come out of the $4.5 billion recently raised? Will Goldman Sachs own a big chunk of the reorganized CIT, having beaten Carl Icahn in the Battle of the Bondholders?

The market knew the risk of failure:

According to CMA datavision, CIT credit default swaps widened 4.7 percentage points to 38.7% upfront since late September.

Who made credit bets on CIT's failure? FT reported:

In the case of CIT, the market has bought more insurance than the company's $30bn in debt.

That list, especially those not holding underlying debt instruments, is worth perusing. One firm clearly made it, Goldman Sachs.



However, today markets have stabilised and Goldman is over-collateralised on rescue financing. And thanks to the position in CDS, Goldman will actually profit in the event that CIT files for Chapter 11 bankruptcy protection in what one regulator describes as a "double bonanza".

People familiar with the matter say Goldman has no desire to see its client file for Chapter 11. It is in fact trying to renegotiate the rescue financing. But regardless of Goldman's intention, the bank would profit handsomely if CIT were to file for bankruptcy protection.



The high stakes Wall Street boys are at it again.

Posted by PEU Report/State of the Division at 8:05 AM

http://peureport.blogspot.com/2009/10/cit-another-sunda...
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dixiegrrrrl Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-01-09 04:17 PM
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1. Goldman gambles on its insurance again and wins, huh?
And no one will look into it.
I wonder if Goldman was behind the puts on the airlines on 9-11?
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Ikonoklast Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-01-09 04:33 PM
Response to Original message
2. Goldman Sachs, crying crocodile tears for their client
And collecting the insurance on the corpse.

Tails, we win. Heads, you lose.

And they never take a haircut, never.

Must be nice.
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pscot Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-01-09 05:01 PM
Response to Original message
3. When you pay firemen for the number of fires
they get called out for, the arson rate is bound to rise.
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dixiegrrrrl Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-01-09 05:10 PM
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4. Also to be noted is that Citi got 345 BILLION of our money
300 billion..yes, billion...in TARP and 45 billion from FDIC, which now is NOT looking to be repaid.
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angryfirelord Donating Member (248 posts) Send PM | Profile | Ignore Sun Nov-01-09 06:17 PM
Response to Reply #4
5. CIT, not CITI
I get them mixed up too. Not that it matters, both companies are crooks anyway.

The thing is a couple days ago, CIT got a 2nd private bailout in order to prevent such a thing. They also got $2.3 billion from TARP.

http://www.bloomberg.com/apps/news?pid=20601103&sid=a3....
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dixiegrrrrl Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-01-09 09:52 PM
Response to Reply #5
6. Thank you for correction. Seriusly.
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