As if we needed yet another example of how the taxpayer should have been better protected when bailing out Wall Street last fall…

If CIT goes bust, Goldman Sachs will get a $1 billion "make-whole" payment for an earlier emergency capital infusion. 

The U.S. taxpayer, meanwhile, who should have been entitled to the usual last-in-first-out protection any private investor would have demanded (as Goldman did), will lose $2.3 billion.

Henny Sender and Saskia Scholtes, FT:  Goldman Sachs stands to receive a payment of $1bn – while US taxpayers would lose $2.3bn – if embattled commercial lender CIT files for Chapter 11 bankruptcy protection, people familiar with the matter said.

The payment stems from the structure of a $3bn rescue finance package that Goldman extended to CIT on June 6 2008, about five months before the Treasury bought $2.3bn in CIT preferred shares to prop it up at the height of the crisis. The potential loss for taxpayers would be the biggest to crystalise so far from the government’s capital injection plan for banks.

The agreement with Goldman states that if CIT defaults or goes bankrupt, it “would be required to pay a make-whole amount” that totals $1bn, the people familiar with the matter said.

While Goldman is entitled to demand the full amount, it is likely to agree to postpone payment on a part of that sum, these people added. A CIT filing last week said that it was in negotiations with Goldman “concerning an amendment to this facility”.

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