The negative implication of the possible CIT Financial failure.
By Daniel at 10 July, 2009, 1:50 pm
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In Case You didn’t Know CIT Financial has lent money to over 950,000 Small Business’s over the last 10 years. I am a commercial lender for a Bank with $50 Billion in assets. CIT and Zions are the only firms I have found to lend to these small businesses in the last year, including my Bank. If these firms are allowed to fail (unlike GMAC) expect another wave of Small Business Defaults, which leads to more Commercial Loan Defaults and more layoffs. Its looking more and more like we will have little to no growth for the next 5 to 10 years.
The FDIC has created a vicious cycle with its delay tactics: by holding back financial help, the credit rating agencies have used that fact to continually downgrade CIT. Now the FDIC cites those same credit ratings as one of the reasons for withholding help. Talk about a self-fulfilling prophecy: the FDIC participated in creating the climate of fear that lead to the downgrades.
The idea that the FDIC would withhold help, while offering it to every other major institution in the same class (without exception) and requiring CIT to post larger assets than other institutions for the same level of help, is a fiasco.
I’m not a fan of bailout funding, but if the government’s going to do it, they need to play fair and offer the same help to everybody under the same criteria, without favoring one institution over another.
Without that help, we’ll have another Lehman on our hands, only this time it will go right to the heart of small businesses.
＂In a note Friday, bond research firm Gimme Credit said that it doesn’t view CIT - which in December received $2.33 billion of funds from the U.S. government’s Troubled Asset Relief Program - as too big to fail, at a time when there is a long list of other troubled banks awaiting regulatory attention, some with more insured deposits at risk than CIT.＂
“CIT is an important lender for mid-sized businesses, but it doesn’t have a dominant market share in any of its business lines,” wrote Gimme Credit analyst Kathleen Shanley. “Finance companies like CIT have failed before with no serious repercussions.”
CIT is the biggest middle-business bank in the US, the economy needs this type of banks in order to achieve a quicker recovery.
If this giant goes down, it’s gonna make a lot of noise.
I totally agree. FDCI caused all the uncertainty surrounding CIT and now uses that as a reason to deny the participation in the TLGP. The FDIC also seems to think that other banks like JP Morgan and Deutsche Bank can handle the business of CIT. Unfortunately they are not interested in that sector otherwise they would have taken the chance from the turmoil over the last months to grab business from CIT (what they did not at all).
Its a shame that that the FDIC created this situation. They should have approved or denied CIT back when they approved GMAC. Its stupid that GMAC — *cough*Cerberus*cough* has such political connections to siphon public money into a private company that has a history of running businesses into the ground.
CIT did everything right. They got rid of the risky assets early (and at a loss) and then they are getting punished because they have none of those “toxic” assets — so they don’t get bailed out like the banks who held them.
This is about the Fed *&* 5-7 New Banks controlling and elimentating competition
Goggle “Federal Reserve *&* get Educated”
Probaly Chase or ? the “Chosen ONE” with the Feds Blessing will Screw the “Stockholders” *&* Bondholders and end-up with the assets and no new shareholders or Bond holders