Refusing Bailout For CIT, Gov't Draws Line In Sand

[Purveyor]

Source: Associated Press

July 15, 2009 9:30 PM ET

WASHINGTON (AP) - The Obama administration drew a line in the sand on financial bailouts Wednesday by denying emergency aid to CIT Group Inc., a struggling commercial lender on the brink of bankruptcy.

After days of round-the-clock talks with regulators about a possible government bailout, CIT said those negotiations had ceased. The company said its management and directors were "evaluating alternatives."

The decision not to save CIT is a defining moment for the Obama administration's financial rescue program, headed by Treasury Secretary Timothy Geithner. By withholding aid, the administration is betting that CIT's likely failure won't pose a critical risk to an economy weighed down by rising unemployment.

CIT, which had earlier received $2.3 billion of bailout money, is one of the nation's largest lenders to small and mid-size businesses. The company has warned that its failure could imperil about a million corporate borrowers — from Dunkin' Donuts franchisees to retailer Dillards Inc.

The Bush administration paid a price for its decision not to save investment bank Lehman Brothers, which had eight times more assets than CIT. Lehman's collapse helped spark the financial crisis last fall.

Read more: http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=AP&date=20090716&id=10139665

[xchrom]

1. does CIT pose as an example for corporations like goldman sachs?

no.

[aquart]

5. Hey, they only provide loans to small and mid-sized businesses.

What could be less important to Wall Street and Geithner?

[girl gone mad]

12. They haven't been lending for several quarters now.

It's hard to make an argument that they pose a systemic risk in light of that fact.

[SpartanDem]

2. I don't think this is a good idea

CIT is major small business lender

[Ghost Dog]

11. A reminder of the LEAP/2020 predictions

published June 17th "Global systemic crisis in summer 2009: The cumulative impact of three « rogue waves »":

Because the origins of the crisis remain unaddressed, LEAP/E2020 estimates that the summer 2009 will be marked by the converging of three very destructive « rogue waves », illustrating the aggravation of the crisis and entailing major upheaval by September/October 2009...

The three « rogue waves » of summer 2009:

The wave of massive unemployment: ...It will be the time when, instead of a consequence of the crisis, unemployment worldwide will turn into a factor aggravating it...

The breaking wave of serial failures: companies, banks, housing, states, counties, towns: ...Apart from these very high profile events, the number of failures of large, medium and small companies and financial institutions is rapidly and steadily growing...

The wave of the terminal crisis of US Treasuries, Dollars and Pounds, and the return of inflation...

http://leap2020.eu/GEAB-in-English_r25.html

[Abq_Sarah]

13. Since Washington

Doesn't rake in enough dough from small business lobbyists, this isn't a surprise.

[harmonicon]

3. who needed that 2.3 billion anyway? move along. nothing to see here.

[BOG PERSON]

4. Looks like we're ALL going to have to tighten our belts a little

No more Dunkin' Donuts for anybody :(

[Joanne98]

6. CIT Calls Bailout Unlikely, Fuels Bankruptcy Concern

Source: Bloomberg

July 16 (Bloomberg) -- CIT Group Inc., the 101-year-old commercial lender running short of cash, said it probably won’t receive a federal bailout, fueling speculation the company is on the verge of bankruptcy.

Talks with regulators have broken off and “there is no appreciable likelihood of additional government support,” the New York-based firm said yesterday in a statement. CIT, once the biggest independent commercial lender, may seek court protection if no U.S. aid emerges, Standard & Poor’s said this week. The company said it is “evaluating alternatives.”

CIT Chief Executive Officer Jeffrey Peek failed to convince regulators that fallout from a collapse would threaten the rest of the financial system. Officials at the Treasury, Federal Reserve and Federal Deposit Insurance Corp. have resisted putting more taxpayer funds at risk, on top of the $2.33 billion granted to CIT in December, to keep the lender afloat.

“Maybe they can put together a last-minute deal and try to sell themselves,” said Adam Steer, an analyst with CreditSights Inc. “The most viable alternative once the government decides to not step in is a trip into bankruptcy.”

CIT is seeking $2 billion in rescue funds from owners of its debt and has given them 24 hours to put up the money, the Wall Street Journal reported today, citing unidentified people familiar with the matter. CIT told investors that without the cash, it will probably file for bankruptcy, the Journal said.


Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=a5twPLxaG23Y

[Odin2005]

7. This is going to be REALLY bad.

We can bail out a bunch of parasites like Goldmuck-Sucks but not a bank that helps small and medium-sized businesses? What kind of BS is this?

[PassingTimeHere]

8. It's just more and more evident who owns both parties

Which is why I have NO HOPE for a decent health care bill.

[high density]

9. So we gave CIT $2.3 billion earlier

That seems to be an important thing to consider in this "refusal" and all of the Wall St press that is currently crying out for another handout to CIT.

[LeFleur1]

10. Can't the Borrowers Pay Their Bills?

And if that is the case, did they lend to unstable businesses in the first place? We know mortgage companies threatened appraisers, inflated housing prices, lied about the income of borrowers. Did CIT use the same tactics in the field of business. A house of cards won't stand for long. A good long look at the management of CIT and others is past due. Pouring more money into a badly run organization won't change things if the problems aren't solved. I don't know if this is the case with CIT. Just wondering.

[girl gone mad]

14. CIT had a very poor business model.

They got greedy and reckless in the last years of the credit bubble and they were extending loans to failing companies in an effort to deliver "growth" to their shareholders (so the execs could pay themselves huge bonuses, I'm sure).

You are absolutely correct that they should be allowed to fail. In my view, the government should focus on helping people and stop pouring money into the black holes that are zombie banks and companies with broken business models.

[stenciltactical]

15. CIT Gets $3 Billion Rescue Loan To Prevent Bankruptcy - huff pos

http://www.huffingtonpost.com/2009/07/19/cit-reaches-3-billion-dea_n_240268.html

So the other bailed out institutions bail out CIT...