Morning stuff/CIT and China

For just the 2nd time since the credit bubble imploded, the Fed and Treasury said no to another bailout. I fully acknowledge the potential bankruptcy of CIT will be highly disruptive and difficult for small business but score one for American Capitalism as I’m extremely confident that healthy financial institutions will step in and fill the funding hole as CIT’s model was hampered by their reliance on the wholesale funding markets. Low cost deposits are the ideal funding source for CIT’s business. We will hopefully now have lending decisions made by healthy companies rather than a zombie one. The WSJ reported that CIT has already slowed its lending due to their financial constraints. In a bankruptcy, CIT’s outstanding loans will hopefully be bought and serviced by other financial companies and some will be put in run off. China has quantified the impact of its huge stimulus package by reporting Q2 GDP rose 7.9% y/o/y, .1% more than expected. Urban fixed asset investment through June is up 33.6% y/o/y. Following yesterday’s M2 report rising more than expected, China sold 1 yr notes at 10 bps above last week’s level in order to drain some cash from the system. Add JPM to the list of solid earnings releases. BoA, Citi and GE report tomorrow and GE will have plenty to say about CIT. Claims, TIC data, Philly Fed and NAHB surveys are all out today.

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