Short-term government bailout looking more likely for CIT
Filed under: Company News
Looks like the government may be deciding CIT is too big to fail. Reports all over the Internet indicate talks with CIT (CIT) for a possible government bailout have intensified. Analysts have concluded that a bankruptcy won't solve the commercial leasing and financing company's long-term problems. The most likely solution is a short-term government loan while CIT and the government look for a deep-pocketed investor to buy the company. Sounds like a replay of the Washington Mutual scenario.CIT's stock plummeted 12 percent to close at $1.35 on Monday. Standard & Poor's downgraded CIT late Monday and warned that the company may try to restructure its debt, possibly through bankruptcy or through a "distressed" exchange offer. S&P told bondholders in a statement, "CIT has more than $1 billion of unsecured notes maturing in both third- and fourth-quarter 2009 - payments that could become increasingly difficult to make if borrower draws increase significantly and CIT does not win regulatory approval of its strategic initiatives."
Sean Egan of Egan-Jones told Marketwatch that some short-term government support and then a sale to a large bank would be CIT's best option. CIT's business model was never that of a bank. It was a lender to small- and medium- manufacturing and retail companies. It filed to become a bank just last December in order to get access to TARP funds, so CIT doesn't fit the FDIC's usual guidelines for a bank bailout.
However, without government aid, CIT estimates that about 760 manufacturing firms may be at risk, as well as 300,000 retailers. These businesses will be without credit to run their operations if the FDIC doesn't back CIT's debt. U.S. Treasury Secretary Timothy Geithner said Monday he was confident the government would be able to deal with CIT, whatever that means.
The big question is that in making the deal to save CIT, how much taxpayer money will be put at risk? Can we afford to keep propping up these financial companies that obviously have been run by risk takers who were out to make big bucks, but didn't care about the true health of their firms?
Lita Epstein has written more than 25 books including Reading Financial Reports for Dummies.
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Reader Comments (Page 1 of 3)
7-13-2009 @ 9:13PM
Tami said...
If the US Government bails out CIT they best include the TAXPAYERS. In my opinion there is not a politician in DC that has a clue what the Common Worker/Taxpayer is going through. I'm not talking about those folks who put themselves in the toilet. There are many of us who go to work every day and aren't paid enough to participate in the Company 401(k) or other benefits package. We need every penny of our paychecks to make ends meet. Many work a full time job and part time job I know I do. We own modest homes and used vehicles, we don't take expensive vacations, we live within our means and barely above what some would consider poverty level. Screw CIT, AIG, BOA etc. You reap what you sow. They put themselves in this position with their BS shenanigans I say let them dig themselves out, that's what the Taxpayer would have to do.
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7-14-2009 @ 12:35AM
mickey said...
Poorly written article. WTF is CIT?
7-14-2009 @ 12:50PM
Linn said...
DAMN RIGHT
7-14-2009 @ 2:57PM
JP said...
Why do they have to lie to China? They know the U.S. can't go no further than down. They are just trying to buy time. The big corp's in this country can't even keep their businesses afloat, let alone know how to run them. This country invested money it didn't have in failing businesses. How stupid is that? Unless this country can come up with a way to create 6 million jobs and sell all the foreclosed homes at their mortgage value or higher, it is in deep chit. This country is like a boat with a hole in it, they keep drilling more holes hoping that the water will drain out. Next step martial law. *** http://new-world-order.itrustgodonly.com/list.php?q=martial+law&Submit=GO
7-14-2009 @ 3:10PM
Stanley said...
I agree TOO BIG TO FAIL! and us taxpayers are TOO SMALL TO SAVE!
7-13-2009 @ 9:46PM
carrie said...
I weigh 300 pounds. I'm I too big to fail or do we all just need to lose some weight.
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7-13-2009 @ 9:55PM
Frank said...
The forest need to burn down to kill all the leeches. No more bailouts.
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7-13-2009 @ 10:25PM
Tony said...
I worked for one of CIT's divisions and can honestly say that they created their own problems. Why bail these idiots out? I agree with Tami that you might as well include the taxpayers. Let CIT sink. If the government knew the truth about CIT and their horrible lending practices, they would never want to bail these clowns out. Did the government bail out BLX (largest SBA lender in the country)?? NO!! Why is CIT so special. They are not a bank governed by the same rules as a bank. CIT can do whatever they want (within reason). So, why bail them out? There are other lenders out there who could step in with better lending practices. Give them some equity to inject into the credit markets. Don't give CIT a dime. It's about as bad as giving more "party" and "bonus" money to the thieves at AIG. Stop the insanity. Saving a bank that has a real impact on the banking system (like Citi or JP Morgan Chase) is one thing. Saving CIT is something very different. DON'T DO IT!!!
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7-13-2009 @ 10:45PM
kc said...
I CALL MY TOILET, TOYOTA, BECAUSE THAT IS WHERE I TAKE MY JAP CRAP.
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7-14-2009 @ 12:01AM
Andy said...
None of these company's are to big to fail. They need to go through BK to restructure. This is nothing but mafia style run gov, taking care of there buddies with tax payer money.
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7-14-2009 @ 12:01AM
jimbo said...
Whats with this CIT stuff? Are we talking about CITIBANK? I mean SHITTYBANK?
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7-14-2009 @ 12:27AM
lpt said...
did cit buy dell finanical. cit recently closed my dell account so why do they need taxpayers bailout.
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7-14-2009 @ 12:45AM
ell said...
CIT is a Financial Services Company. The name has recently changed to Vericrest Financial, Inc.
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7-14-2009 @ 1:57AM
dan said...
Give them a bailout, they give themselves a raise and a bonus. God Bless America!
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7-14-2009 @ 2:25AM
Red said...
are we out here blowing smoke again? show of hands. who thinks anything we have to say means a damn or will influence what happens? i don't see any polls being taken to get the populations opinion. rather than debate it, let's just watch and when it happens again, unite and defeat this run away corporate owned government.
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7-14-2009 @ 5:31AM
Bo said...
It's time to let some of these companies go under. No more bailing out failures. The marketplace has gotten to big and if you don't plan your business correctly you lose.
Let CIT go, finding a bigger bank to buy them out only brings more debt that will drag that bank down.
This is Economics 101, only the strong survive.
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7-14-2009 @ 6:42AM
Bo said...
Time for the bailouts to stop. If they make bad decisions they will have to live with the results. Finding a bigger company to buy them only postpones the inevitable and will only drag the purchaser down, why would someone purchase a failure. This is Economics 101, you reap what you sow, so down you go. Let's move on. Investing is legalized gambling, you win some you lose some.
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7-14-2009 @ 6:46AM
Sim said...
It amazes me that these banks can put me through the ringer when i go to borrow money for a car, or a nessessity, but they dont have to answer to anyone.. but its my credit score that matters, not theres!!!! who do the banks answer too? can i get a better rate if they use my tax dollars to bail them out?? WTF!!!!
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7-14-2009 @ 9:10AM
J C said...
CIT is a scumbag company with preditory lending practices aimed at small family run business. Better to take a loan from a shark on the corner then deal with these people. They belong in prision ... all of them. Once again, sorry kids, no roof over your head, no food on the table. Uncle B. Hussian Obama has given another bailout to a den of theives. How's the private jet Nancy?
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7-14-2009 @ 7:13PM
Philip McElroy said...
The George Bush/Repulican Party Great Depression (caused by political greed and corruption)is here and there is going to be a long time passing, before we crawl out of this hole. The bailouts of all financial institutions was and is a Failed Idea. Former President George Bush, before he left office, spent 2.7 Trillion dollars, in the last year of his administration, trying to prop up the various institutions. The only economic growth under Bush was debt, spending over 500 billion a year, on the Iraqi War, people living of credit cards to keep up with 10%+ annual inflation and fraudulent real-estate loans to families , to name a few of the smoke and mirrors growth. Wages are and have been flat, and are now declining. There is no gowth potential till wages stabalize, good paying jobs are created, and the Dow bottoms out, which should be somewhere around 4000-5000. Funny though, is that this was quite common knowlege to many individuals, from various diverse backgrounds, but none of the so called experts saw it coming. These are notes, from conversations with friends back in 2006/2007. Good Luck USA, because besides a lot of prays, we are going to need a lot of good luck.
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