Too big to fail after all

When jobs are on the line, letting a lender to small businesses go kaput would be the anti-stimulus

Published July 13, 2009 10:14PM (EDT)

Maybe CIT, the latest U.S. financial institution to take a swirl around the toilet drain, will get some government help after all. This morning, the conventional wisdom as reported by Bloomberg, the Wall Street Journal, and the Financial Times was that the struggling insurance company would not be saved from bankruptcy. But the Journal is now reporting that "U.S. government officials are in advanced talks" about further aid.

According to the Journal, Congress doesn't have much appetite for more bailout action, and the FDIC has also been resistant, but Treasury and the Federal Reserve are more amenable. But the killer quote lines up exactly with what I was wondering this morning -- the impact that the failure of a company that specializes in loaning to small-and-medium-sized businesses would have on jobs.

"It seems like official Washington is just coming to grips with what would happen if the largest small business lender went belly up," said Jaret Seiberg, a policy analyst at Concept Capital's Washington Research Group. "It would destroy Democratic hopes of getting unemployment under control before the midterm election."

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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