« | »

Obama Refuses Second CIT Bailout

From a gleeful Associated Press:

CIT won’t get bailout, raising bankruptcy prospect

By Stevenson Jacobs And Daniel Wagner, AP Business Writers

WASHINGTON – CIT Group Inc. shares tumbled more than 70 percent Thursday as its inability to get emergency government funding raised expectations that the commercial lender will file for bankruptcy protection.

It is unclear how a bankruptcy filing by a company that lends to thousands of small and mid-size businesses would affect shaky financial markets hobbled by an economy in recession and bleeding hundreds of thousands of jobs a month. Small businesses are seen as keys to economic recovery.

CIT said late Wednesday that negotiations with regulators about a possible rescue had broken off after days of round-the-clock talks.

The move marked a defining moment for the Obama administration and showed it’s drawing a line in the sand on federal rescues for troubled financial firms.

In a last-ditch effort to avoid bankruptcy, CIT is trying to line up $2 billion to $4 billion in rescue financing from its debtholders within the next 24 hours, a source familiar with the talks told The Associated Press. The person requested anonymity because they weren’t authorized to speak publicly.

But investors were acting as if bankruptcy were unavoidable, sending CIT shares skidding $1.18, or 72 percent, to 46 cents in morning trading after sinking as low as 31 cents earlier in the session…

CIT’s small size relative to other big commercial banks may also ease worries of a ripple effect. Though a major lender to small and midsize U.S. business with about a million clients, CIT is one-eighth of the size of Lehman Brothers when massive credit losses forced the investment bank into bankruptcy last fall…

CIT, which got $2.3 billion of bailout money in December, has warned that depriving it of more federal aid could imperil about a million corporate borrowers — from Dunkin’ Donuts franchisees to retailer Dillards Inc…

A bankruptcy filing would wipe out CIT’s shareholders and the government’s $2.3 billion stake

New York-based CIT was negotiating with officials from the Treasury, Federal Reserve and Federal Deposit Insurance Corp. for much of the week. FDIC Chairman Sheila Bair resisted lobbying by CIT and other regulators for her agency to come to the rescue.

An agreement on aid appeared close at midday, but trading of CIT’s shares was halted Wednesday afternoon. CIT said late Wednesday that negotiations had stopped.

"I think it makes a bankruptcy filing a near certainty," Ely said. "It’s quite possible they could file before trading on Thursday."

The company in April posted a larger first-quarter loss than expected and has seen funding options disappear as investors shy away from purchasing all but the safest forms of debt. The lender has $7.4 billion in debt coming due in the first quarter of 2010, plus other obligations…

Obviously CIT Group is no longer too big to fail.

Or maybe they are just too helpful to those small businesses, which are famous hot beds of Republicans.

Worse yet for them, they are probably viewed as competitors to Goldman Sachs.

This article was posted by Steve on Thursday, July 16th, 2009. Comments are currently closed.

3 Responses to “Obama Refuses Second CIT Bailout”

  1. proreason says:

    “Worse yet for them, they are probably viewed as competitors to Goldman Sachs.”


    Good facists prefer their symbiotic relationships to be with a small number of criminal co-conspirators. The fewer there are, the more efficient it is to syphon the wealth into the despots pockets.

    • tranquil.night says:


      It’s a two-fer win here. Despite the non-stimulated economy and billions in lost taxpayer money, Obambi gets away looking like he finally stayed his itchy hand from the red bailout button and showed ‘restraint.’

      The private sector further crumbles and just wait – the administration will bailout (integrate) small businesses next just like he said he’d magically stop foreclosures – starting with the ones that made campaign donations. He’ll make Republicans eat their own words while doing it, too, “They said small businesses are the foundation of our country, yet they now oppose getting much needed relief to those suffering!”

  2. Chuckk says:

    This is the first smart thing done by this administration. I wouldn’t be surprised if it is reversed.

« Front Page | To Top
« | »