CIT about to go!

[Mega]

http://www.bloomberg.com/apps/news?p...d=avvzl__iWEhM
Mike

[Slimprofits]

Re: CIT about to go!

Everyone wants to know what the effects of the bankruptcy of CIT will be.

The cause of the next panic?

[Adeptus]

Re: CIT about to go!

For a second there I thought this was Citi Group. :eek:

Calculated Risk offers a few more links on the subject:
http://www.calculatedriskblog.com/20...cy-ceo-to.html

NYTIMES: http://www.nytimes.com/2009/10/13/bu...13lending.html

Yahoo Finance:
http://finance.yahoo.com/news/CIT-de....html?x=0&.v=3


So basically:
- 2.3 Billion in TARP money about to go *poof* into the night?
- CEO to quit Dec 31st (will he get golden parachute?)
- 1 MILLION small businesses about to see credit tighten?
- CIT does not qualify for FDIC support, right?

Adeptus

[mmr]

Re: CIT about to go!

CIT has been a slow-motion car crash ever since their subprime mortgage business began to blow up in mid-07, which pushed their funding cost over 10% (a really bad business model when they can't originate a new loan with a yield over 10%).

The company has basically been in runoff since that time and other banks have long since picked off its best customers since CIT just can't compete on price. They've cut back their lending volume tremendously this year, so despite what their lobbyists would say, a final liquidation would mainly hurt the bondholders rather than the real economy - most of the damage to the real economy has already been done.

CIT has about $10 bil of its $70 bil in assets in a bank subsidiary that the FDIC could theoretically seize. Most of CIT's better assets were pledged for secured borrowings (i.e., Goldman, Barclays, etc. will just seize and resell these loans if the company liquidates, leaving not much of value for the bondholders to fight over.)

The government will likely lose nearly all of the $2.3B TARP investment, unless they throw good money after bad a la Chrysler.