CIT Group, Inc., a major business lender, filed for bankruptcy Monday, becoming the largest recipient of Troubled Asset Relief Program (TARP) assistance to go bankrupt...
The plan, which was approved this month by a majority of bondholders, would repay bonds at 70 percent of their original value and issue holders with new stock. Present owners of preferred and common stock, including the US government, will see their holdings wiped out...
CIT provides day-to-day financing for thousands of small- to medium-sized businesses, including 2,000 vendors that supply 300,000 retail stores, according to the Wall Street Journal. It is one of the largest lenders to the retail industry, serving 2,000 vendors that supply merchandise to 300,000 stores.
CIT executives said that the firm’s customers will face only minimal disruptions to their operations, but other commentators painted a less favorable picture... Retail groups made complaints along the same lines, saying that CIT's bankruptcy would make it more difficult to get credit under conditions where commercial banks were constricting lending...
One of CIT's main businesses is factoring, a financial service essential for many small and medium-sized manufacturers. As the country’s largest factor, CIT buys the receivables of thousands of manufacturers and suppliers, mainly to retail businesses. For a fee, it pays its clients cash up front, so they do not have to wait 30 to 90 days for retailers to pay for their supplies and inventory. It also guarantees suppliers that they will be paid even if retailers whom they supply go bankrupt. CIT controls 60 percent of the US market for factors...
The decision to let CIT fall will help the bigger banks, which have been the major beneficiaries of the consolidation of the banking system under the selective "too-big-to-fail" policy. As the Wall Street Journal pointed out, the recipients of CIT's lost business will include JPMorgan, Wells Fargo and Goldman Sachs.
http://www.wsws.org/articles/2009/nov2009/citb-n03.shtml
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
