CIT Bankruptcy Likely

July 15, 2009 10:38pm by Barry Ritholtz

As noted earlier, (Is CIT Bankrupt Yet?) it is likely that CIT is going to have to go reorg.

It does not appear probable they will be getting a bailout.

The obvious reason why not is that CIT does not present a “Systemic risk” — but the less obvious answer may surprise you: They simply haven’t been making many loans.

The company tried to make the argument they were too important to the economy in terms of funding small businesses. The lifeblood of small entrepreneur, thre key to economic recovery.

Only not so much. You see, during the credit crisis, CIT has more or less curtailed their lending. That’s right, very little origination over the past few quarters.

Hence, why they are going buh bye.

See also:
CIT Says It Won’t Get More U.S. Aid
MICHAEL J. de la MERCED and ERIC DASH
NYT, July 15, 2009
http://www.nytimes.com/2009/07/16/business/16cit.html

CIT Calls Bailout Unlikely, Fueling Speculation of Bankruptcy
Linda Shen
Bloomberg, July 16, 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_YL57lGp8ds

CIT Scrambles for Rescue Financing
DAMIAN PALETTA, JEFFREY MCCRACKEN and SERENA NG
WSJ, JULY 16, 2009
http://online.wsj.com/article/SB124768727832747201.html

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