Capitalism is Back?

This weekend CIT negotiated with its bondholders to avoid bankruptcy. The negotiations were rushed due to the Treasury office and FDIC refusal to aid the small business lender. CIT may still fail because the money is enough to pay down interest and outstanding debt but the firm still needs capital to continue to earn money. This was a trade I had on but closed because the government was an uncertain wild card. Whether CIT was too little to save or not a threat of systematic risk the government must allow failure. While some argue for drastic situations call for drastic measures, this view is wrong. For capitalism to work there must be destruction and creation. The government allowing small firms to fail and rescuing large firms is the systematic problem. If capital is tied up in large failing firms, small efficient firms do not have access to capital to grow and expand. This is my stance but I still plan to buy BAC, as a trader buy the winners that will take taxpayer money and increase earnings.