We will find out soon enough, but the expectations are that by the time you read this, CIT may be already preparing to file.
I have mixed feelings about this:
“CIT is a lender to nearly a million mostly small and midsize businesses and companies, and while its failure may not jolt financial markets in a large way, it could hurt the flow of credit to many businesses to whom banks traditionally won’t lend.
The government gave the bank-holding company $2.3 billion under the Troubled Asset Relief Program last year but so far hasn’t included CIT in a separate program that would allow it to issue debt at low interest rates.
While CIT has limped through the credit crisis, the lender is nearing crisis point, facing $2.7 billion in debt due from now till year end that investors worry it may not be able to make.”
There shouldn’t be bailouts of insolvent companies — but you can see why this would make for a tempting target of government largesse:
“CIT Group Inc., the century-old lender that hasn’t been able to persuade the government to back its debt sales, says its demise would put 760 manufacturing clients at risk of failure and “precipitate a crisis” for as many as 300,000 retailers.
A collapse would ripple across the “small and medium-sized businesses who rely on CIT to operate — to pay their vendors, ship goods to their customers and make their payroll,” the New York-based lender said in internal documents obtained by Bloomberg News that make the case for its importance to the U.S. economy. CIT spokesman Curt Ritter declined to comment on the documents.”
Bailing out CIT will make a mockery of “systemic risk” — as if it wasn’t already subjected to humiliating abuse as an economic concept. Further, it introduces “economic risk” as a basis for government intervention. And that means just about any company qualifies . . .
CIT Group Says Its Failure Risks Demise of Customers
Pierre Paulden and Caroline Salas
Bloomberg, July 13 2009
CIT Group Scrambles to Survive, Avoid a Run
JEFFREY MCCRACKEN and SERENA NG
WSJ, July 13, 2009
CIT Group said to hire bankruptcy adviser
AP, July 11, 2009
CIT Offers Litmus Test for Washington’s Faith in the System
WSJ, July 11, 2009