No Bailout For CIT

Just as I thought, only 2 days ago on Monday.

CIT talks fall apart, bankruptcy may loom
(7/15/09 Reuters via Yahoo Finance)

"WASHINGTON/NEW YORK (Reuters) - CIT Group Inc (NYSE:CIT - News), a major lender to small- and mid-sized U.S. businesses, said on Wednesday that talks with the government to bail out the company had ended, a development that could make bankruptcy likely.

""Discussions with government agencies have ceased," the New York-based company said in a statement. "There is no appreciable likelihood of additional government support being provided over the near term."

"The announcement came after last-ditch talks in which Treasury Department had been concerned about a worsening liquidity crunch at CIT over the last few days, and that government aid would not put the lender on a path to recovery.

"CIT said its management, directors and advisers were evaluating alternatives. It did not elaborate.

"A bankruptcy filing would mark one of the largest for a U.S. company since the global credit crisis accelerated last September."

CIT had received $2.3 billion of TARP money. No more, says the Treasury. I suspect CIT lacked a strong connection to the present administration.

I also find FDIC's attitude very amusing:

"The FDIC has been reluctant to do so [granting CIT access to its government debt guarantee program], however, because the program is designed for healthy institutions, and it believes CIT's participation involves too much risk."

FDIC has granted access to numerous institutions that are not the best examples of health (Citigroup and Bank of America come to mind). FDIC itself is no such example either, with reserve ratio of paltry 0.27% as of March 2009. It would need a massive bailout from the taxpayers more than any private sector financial institution.

But no matter. The government has decided who will be the winner and who will be the loser. CIT is the latter, but won't be the last loser as the government continues to extend its grabby hand into every aspect of our lives.

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