[misterno]

http://www.bloomberg.com/apps/news?pid= ... fUiHMvPVyE

[evilgenius]

Dangerous times, aren't they. I heard the whole time I was growing up from those that had been through the depression that it was when the banks went under that things really turned, not the stock market per se. People had money one day and the next they had only the cash they happened to have on hand. In a very real way CIT's collapse would make that situation happen again only with small businesses this time and only in a very important niche in the economy. The magnitude of what must be done to even make this a recession rather than a depression is just overwhelming. It is beyond the imaginations of most involved.

[Tyler_JC]

Does anyone think the government would just let CIT implode like Lehman Brothers?

They've already spent hundreds of billions (trillions, if you count non-direct aid) propping up the banking system. It wouldn't make any sense to let another systemically important bank fall apart and risk a return to the panic mindset of March.

CIT is crying out for help in that article. They are threatening to take down the banking system (and the economy) if they don't get what they want.

Does anyone seriously think the government and the Fed are going to call CIT's bluff?

[DantesPeak]

CIT as a company will continue onward. The AIG and Lehman bailouts are flawed models, and probably should not be used. The Fed should not become an direct owner and take losses that really belong somewhere else. The Fannie/Freddie model is also flawed, but less so. I don't think we fully understand the Chysler/GM bankruptcy model yet, but that path is quite possible. Government ownership and direct or indirect guarantees.

Please note the stock should be avoided no matter what happens.

JULY 14, 2009 U.S. in Talks to Rescue CIT
Regulators Split Over Providing FDIC Debt Backing to Lender; Deal Is Uncertain

WASHINGTON -- U.S. government officials are in advanced talks about providing some sort of aid to CIT Group Inc., one of the country's primary lenders to small and midsize businesses, people familiar with the matter said.

The discussions are fluid. It remains unclear whether a final deal can be brokered and, if so, how expansive it might be.

CIT has been battered by heavy losses, but so far, regulators haven't deemed its problems big enough to pose a threat to the broader financial system. Government officials are worried, however, about unforeseen consequences that a CIT collapse could trigger. The Obama administration has struggled to launch a program to spur lending to smaller companies, a business in which CIT is a key player, with loans to nearly a million customers.

One possible source of aid would be a Federal Deposit Insurance Corp. program that guarantees newly issued debt. CIT has been seeking for months to take advantage of this program, but the FDIC has been reluctant to let it, because of CIT's financial weakness. The Treasury Department and the Federal Reserve are more supportive of such a move, said several people familiar with the process. It remained unclear Monday whether the FDIC would soften its position and let CIT issue federally guaranteed debt.

http://online.wsj.com/article/SB124749287053432615.html#mod=testMod

[the48thronin]

why don't they just hire gunmen and take actual control?

The bankers army.... leave you wallet on the ground and back slowly away

[the48thronin]

Duh I just got it... they already have an army to use...only it's busy telling the rest of the world what to do with their wallets!

[DantesPeak]

CIT to continue with Fed bailout. Not the best way to handle this, or least costly to the government in the long run, but keeps CIT out of the news.


http://online.wsj.com/article/SB1247618 ... od=testMod

JULY 14, 2009, 8:58 P.M. ET.CIT, Regulators Negotiate Details of Multipart Aid Package

By SERENA NG, JEFFREY MCCRACKEN and DAMIAN PALETTA
CIT Group Inc. and federal regulators are working out details of an aid package designed to help the troubled lender resolve its deepening liquidity crisis, according to people familiar with the matter.

The outlines of the plan began to emerge late Tuesday as CIT's financial position deteriorated. Worried customers drew down on their credit lines on Monday and Tuesday, draining hundreds of millions of dollars from CIT, the people said.

Under the plan regulators would allow CIT to transfer assets from its holding company to its bank in Utah; the Federal Reserve would let CIT pledge some of those assets at its discount window and the company would take steps to refinance some of its existing debt. The package is not yet finalized and it remains uncertain whether a deal can be struck.

The future of CIT's chief executive Jeffrey Peek is unclear, one person familiar with the talks said.

The financial position of CIT, a lender to almost a million small and midsize businesses, has weakened in recent days and government officials have come under increasing pressure to resolve the looming crisis. News over the weekend that the company hired lawyers to help prepare for a possible bankruptcy filing prompted nervous customers to draw down on credit lines and the company's bonds and stock slumped. People familiar with the matter put the drawdowns at several hundred million dollars; one said a number discussed by CIT's board ran as high as $775 million.

Officials remain split over how much help CIT should be offered and some feel that CIT could be trying to overhype the consequences of its potential collapse to scare Washington into action. There is also the risk that propping up CIT will reinforce the stigma that Washington will bail out companies that aren't even considered too big to fail. Still, officials know they face unknown ramifications if the company does collapse, and the economy is still in weak enough shape that it's unclear whether they are willing to take that risk.

Treasury officials appeared to be leading the negotiations, according to people familiar with the matter.

The asset transfers to CIT's bank would require approvals from the Fed and the Federal Deposit Insurance Corp.

The FDIC remains reluctant to give CIT access to a temporary program that allows banks and thrifts to issue debt with government backing. CIT late last year received approval to convert to a bank holding company and received $2.33 billion from the Treasury under the Troubled Asset Relief Program.

One likely concern for regulators is how CIT can fund a steep rise in assets at its Utah bank. Part of the company's strategy is to aggressively seek out deposits through brokers, but the FDIC traditionally views such moves as higher risk, especially at companies that are struggling. It's unclear if the FDIC will sign off on such a strategy.

CIT's board, which has been meeting regularly in the past few days, met again late Tuesday with the hope of coming to a solution soon, said one person familiar with the matter.

[DantesPeak]

CIT talks break down, maybe bankruptcy is ahead after all?:

JULY 16, 2009 CIT Talks Unravel; It Weighs Its Options

Small-business lender CIT Group Inc. said "there is no appreciable likelihood" that it will receive fresh government support, suggesting that the company might instead seek to file for bankruptcy protection.

In a written statement issued after the market close, the company said it was "evaluating alternatives."

The company has been locked in talks with government officials and regulators during the past week in a bid to prop up its business. The reason for the lack of success in the negotiations couldn't be immediately learned.

The fate of CIT has posed a dilemma for the Obama administration and a test for its stance on bailing out struggling financial companies. CIT is much smaller than other firms that received exceptional government assistance, such as Citigroup Inc. and American International Group Inc., and many Washington officials felt that it was the type of company that would typically be allowed to fail.

But its unusual role as a key lender to small businesses combined with heightened concerns about unemployment has put government officials at odds over how to respond.

http://online.wsj.com/article/SB1247687 ... od=testMod

[Tyler_JC]

CIT is a medium sized bank.

It's no WaMu or Lehman Brothers.

I don't think there is a systemic risk from a CIT bankruptcy. I think the Feds made the right call on this one. CIT should be sent into bankruptcy and sold to a healthier competitor.

[biofuel13]

Ok I just did a quick Google news search on CIT and it looks like they will not be receiving a bailout. Since they are apparently not too big to fail what kind of impacts can we expect to feel from the death of CIT? Sounds like the 4th largest bankruptcy in US history. Is the media just blowing smoke about this being a big deal or should we actually care?

http://online.wsj.com/article/BT-CO-20090715-717225.html

http://www.bloomberg.com/apps/news?pid=20601087&sid=aag0c_we397E

[patience]

A lot of small businesses who need operating credit are going to suck air on this one, that's obvious. My guess is that with credit already so tight, some weaker businesses will get pushed over the edge into BK. UE goes up again, so consumer spending goes down, so businesses get weaker. Rinse and repeat.

[biofuel13]

So in other words if you are GS or BoA you are too big to fail. However even a combination of several hundred small businesses are OK to fail despite the impacts this will have on unemployment and consumer spending. Shouldn't the government (state, local and fed)also be highly concerned that if many of these small businesses go under due to lack of access to credit that it will be another large impact to tax revenue?

[Novus]

I am sure profitable business contracts CIT has will be sold off to other banks during liquidation. Businesses that operate on credit through CIT will not likely loose their credit just because CIT goes down.

[Roy]

A lot of small businesses who need operating credit are going to suck air on this one

Where I work. Small manufacturer. Uses CIT to borrow against receivables weekly.

I asked the controller yesterday if she had heard about this and she said "they are getting bailed out". I asked if we had a plan b. She said no.

I emailed her the string of articles in this thread.

She seemed grateful but who knows if she will act on obtaining alternative financing.

Soon I could have lots of free time to dig some new garden beds.





.

[patience]

Wonder how long the Federal guarantees will be credible? If the bond market tanks, nobody will give credence to the "full faith and credit" of the US govt, when the govt has no borrowing ability. That could be the end game. At that point, most business would come to a screeching halt. That is the biggest fear of thegovt/Fed, I think. That is the "sudden stop" that Karl Denninger was worrying over a while back, and looks to be closer now.

[Roy]

Well, they just called a meeting and said "dont deposit your paycheck, it will not clear".

Oh boy.

[Daniel_Plainview]

Wonder how long the Federal guarantees will be credible? If the bond market tanks, nobody will give credence to the "full faith and credit" of the US govt, when the govt has no borrowing ability. That could be the end game.

Ordinarily, the govt would raise taxes when it can no longer borrow. But it's kinda tough to tax people who are broke and unemployed. Which is why the Dem's want to tax the rich ... even though they promised that they wouldn't raise taxes ...

I suppose that the US could impose a VAT tax on everyone and everything ... and/or keep printing money.

[eXpat]

CIT's shares, bonds plunge on bankruptcy fears

NEW YORK (Reuters) - Escalating fears about a potential bankruptcy of embattled U.S. lender CIT Group caused its debt to sell off steeply and its shares to plummet on Thursday after it said government bailout talks had ended.

The announcement late Wednesday followed last-ditch talks in which U.S. Treasury officials expressed concern about a worsening liquidity crunch at the 101-year-old company, which lends to hundreds of thousands of small and mid-sized firms.

"This comes as a surprise as we had thought CIT had a good chance of obtaining support," analysts at brokerage Stifel Nicolaus said in a research note. "With these talks ending fruitlessly, we think CIT likely was too stressed for any temporary government solution."

Fitch Ratings downgraded CIT to C from BB-minus, adding the lender will have to file for bankruptcy in the very near term.

Sandler O'Neill analysts said an asset sale or debt restructuring would provide CIT only temporary relief, also suggesting bankruptcy was the most likely scenario.

CNBC television, citing a source close to the debt-burdened company, said CIT is now pursuing a plan that is likely to include a Chapter 11 bankruptcy filing on Friday.

http://www.reuters.com/article/ousiv/idUSN1444850020090716
A nice morsel for the Friday´s thread!

[Homesteader]

Well, they just called a meeting and said "dont deposit your paycheck, it will not clear".

Oh boy.

Was your controller at the meeting? And did she look at you?

[Roy]

Was your controller at the meeting? And did she look at you?

.

I actually missed the meeting.

Was working at another location.

Apparently a lot of others missed the meeting, as it was called on 15 minutes notice.

I got the cliff notes version from her when I got back to the office. Seems like top management didn't see this coming at all. CIT was reassuring their customers back in May that everything was fine. :shrug:

Good news for this week at least is that they were able to fund payroll. I didn't ask how.

The bad news is that obtaining new financing looks iffy. She mentioned that it would be difficult to get the same terms from another lender.

From what I read CIT specialized in 'less credit worthy' borrowers. 2+2= .....

Another day, another dollar.