Today's Outrage is published weekdays at 9:30 a.m. EDT and is available as an RSS feed.It's encouraging to see that the free markets still work and that corporate America didn't become so addicted to government handouts that it couldn't stand on its own. That may be the lesson from CIT, which managed to broker a $3 billion loan from bondholders after getting rejected at the corporate welfare office. I admit that I was baffled by the Obama Administration's decision to draw the line at CIT -- especially considering how important that particular lender is to the small business world. It still seems arbitrary to me that the government would pour trillions of dollars into big banks like Citigroup ( C), Bank of America ( BAC) and Goldman Sachs ( GS) for fear the economy would crumble and then suddenly cut off a lender like CIT that helps finance the primary economic engine, which is small business. Still, I am glad to see that the financial markets are stable enough to provide credit without a push from the big hand of Uncle Sam. Now the question is whether the economy is stable enough to allow CIT to generate the cash flow needed to survive in the long run. That requires consumers to get back into normal spending routines and support the million or so small- and mid-sized businesses that are backed by CIT loans. If those businesses don't make money, then neither does CIT.
Of course, there's more to it than that. The other lesson from CIT is how easy it is to screw up a business when you stray too far from your core competence. You see, CIT decided some time back that loans to businesses weren't enough and so it got into the subprime mortgage game and student loans as well. Ah, how greed can run amok. Sure, CIT would be suffering now regardless. But it might not be in such dire straits had it stayed true to its primary mission. Maybe some tough love from Obama will help. We'll see.