Will the Feds Save CIT Group?

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Sub-prime lender CIT Group is in trouble and asking the Feds for help. Former chief economist for the IMF and current Baseline Scenario blogger Simon Johnson predicts that, on balance, a bailout is probably unlikely. Why?

CIT’s bailout possibilities are now in the realm of political choice… [T]he lack of strong connections between CIT’s CEO and senior Treasury officials looks like a weakness.  CIT seems to sit at the edge of the charmed circle, with regard to meetings, shared social engagements, and intellectual entanglements.  This is a close call, but I think it is just on the outside of the circle – in the sense that with the overall financial market situation more stable, the GM bankruptcy well-managed relative to expectations, and other credit support programs still in place, the balance of official opinion will tilt against CIT.

So then it all comes down to political donations.  At least in terms of what is in the public record, Mr. Peek has not been overly generous, but he did give money to John McCain – and not to any Democrats.  If this is in fact the limit of his recent contributions, I think you know the outcome.

So that’s how they make these decisions. I thought it was something like this:

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WE'LL BE BLUNT

It is astonishingly hard keeping a newsroom afloat these days, and we need to raise $253,000 in online donations quickly, by October 7.

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Readers also told us to just give it to you straight when we need to ask for your support, and seeing how matter-of-factly explaining our inner workings, our challenges and finances, can bring more of you in has been a real silver lining. So our online membership lead, Brian, lays it all out for you in his personal, insider account (that literally puts his skin in the game!) of how urgent things are right now.

The upshot: Being able to rally $253,000 in donations over these next few weeks is vitally important simply because it is the number that keeps us right on track, helping make sure we don't end up with a bigger gap than can be filled again, helping us avoid any significant (and knowable) cash-flow crunches for now. We used to be more nonchalant about coming up short this time of year, thinking we can make it by the time June rolls around. Not anymore.

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