There were five bank failures tonight. Two of meaningful size, but none in Georgia!
Goldman Sachs is trumpeting the fact it just paid the federal government $1.1 billion to buyback the warrants it gave the Treasury Dept. as part of last fall’s baillout package. But Goldman still is benefiting from the government’s largess by sitting on some $22 billion in FDIC-guaranteed debt it sold this past winter.
Goldman Sachs is entitled to make as much money as it wants from proprietary trading–that is trading stocks, bonds, currencies and bonds for its own account. But as long as Goldman benefits from bonds it sold with a government guarantee, it should pay an extra tax on those prop trading gains.
That’s the message from the government’s reluctance to swoop in and bail out one of the nation’s biggest commercial lenders, CIT Group Inc, as it struggles to stay afloat. But even though CIT doesn’t have the firepower to take down the global financial system, its failure would certainly be felt by some of the struggling small businesses that rely on its financing.
The idea of the strip-and-flip crowd a/k/a private equity firms buying distressed banks out of government receivership raises a lot of dicey issues. But with federal regulators approving three such transactions this year and more bank failures on the way, get used to the idea of PE banking.