Small Businesses Hold Their Breath As CIT Teeters On the Brink of Collapse

[RamboLiberal]

Source: ABC News

You may not have heard of CIT Group Inc., but around a million small and middle-market businesses nationwide who count on the lender for financing are nervously awaiting news on the company's fate, as it now teeters on the verge of collapse.

Dunkin' Donuts and Dillard's department stores are two of CIT's major clients, and the lender, in existence for more than 100 years, now accounts for around 60 to 70 percent of small business financing.

But at the moment CIT's fate rests in the hands of the federal government. The lender is struggling under the weight of ongoing losses, a decrease in liquidity and billions of dollars in debt that is about to come due. Since it has already received $2.33 billion from the Troubled Asset Relief Program, there are only so many possible solutions left.

In recent days, the Treasury Department, Federal Reserve and the Federal Deposit Insurance Corp. have debated behind closed doors what to do to help CIT, but the discussions have not yet resulted in an agreement.



Read more: http://abcnews.go.com/Business/SmallBiz/story?id=8088330&page=1

[DJ13]

1. If it was Goldman Sachs they would have already rescued them

[amandabeech]

4. No kidding.

The article says that CIT accounts for 60-70% of lending to small and medium sized businesses.

If even partially true, letting CIT go down without a replacement lender would be incredibly bad for the economy, and maybe for Dem chances in 2010 and 2012.

Your comparison with GS is very apt.

[santamargarita]

8. Goldman Sachs' bonuses would bail them out

:bluebox:

[PassingFair]

2. Don't cry for me, Dunkin Donuts....

the truth is you're OWNED by Carlyle...

"They reached an agreement in December 2005 to sell the brand to a consortium of three private equity firms, Bain Capital Partners, the Carlyle Group and Thomas H. Lee Partners."

[WriteDown]

6. Best coffee in the world.

and a consortium is now being owned by a single entity.

[Vincardog]

3. Cry me a river for CIT and their parasitic corporate practices. Good riddance to bad rubbish

[WriteDown]

5. Its dead....

Don't think people really understand what this means based on some of the comments made on this thread.

http://finance.yahoo.com/news/CIT-Announces-That-bw-984603536.html?x=0&.v=1

[taught_me_patience]

7. Goldman gave them the OK to kill CIT

http://www.businessinsider.com/discovered-how-goldman-hedged-its-exposure-to-cit-2009-7

Discovered: How Goldman Hedged Its Exposure To CIT
John Carney|Jul. 15, 2009, 3:56 PM|13
PrintTags: Wall Street, Investing, Banks, Financial Crisis, Bailout, GE, FDIC, The Rich, New York, TARP, Goldman Sachs, Earnings, Mortgages, Mergers And Acquisitions, Bonus

Goldman Sachs has a $3 billion line of credit out to troubled small-business lender CIT Group. News will be coming out later this afternoon about the fate of CIT, whose shares have been halted on the NYSE. But whether or not CIT is bailed out, Goldman probably won't be hurt very much.

We’ve finally uncovered the answer to the mystery of how Goldman has limited its exposure to CIT. And what we’ve found indicates that Goldman really would have very little exposure to CIT’s failure. What’s more, this risk hasn’t been passed along to others in a way that might create broad ripples if counter-parties on hedges had to pay out following a CIT collapse.

[Lucky Luciano]

10. Nothing wrong with hedging those risks.

If I were able to lend to CIT with a very high rate and hedge by buying their CDS or (LCDS) in a way that locks in heavy profits, then I would do it. The counterparty risk is not terrible - plenty of companies have failed in the last year and the CDS have been paid off - unless Lehman was your counterparty!

I don't think CIT poses systemic risk because others will pick up the slack - though it may be painful for a bit in the short term. Goldman failing would pose more system risk because Goldman is a counterparty to many other institutions who could fall if Goldman defaults. CIT does not have big counterparty risk for others - perhaps they should have strayed from their core business (a la AIG) and trade CDS up the wazoo so they would be a huge counterparty to many and thus posing enormous systemic risk!

[taught_me_patience]

11. Smart move

Goldman hedged counterparty risk with CIT... government said "die"
Goldman didn't hedge counterparty risk with AIG... government said "here's $150B... please pay off your couterparties in full"

Coincidence... I think not...

[Lucky Luciano]

12. Goldman actually hedged a lot of their AIG exposure by

buying huge blocks of AIG CDS.

[taught_me_patience]

13. They had huge exposure

and got paid out nicely...

http://online.wsj.com/article/SB123756518992096521.html

[HCE SuiGeneris]

14. Interesting perspective.

You have more than piqued my interest. I will be following this a tad more closely.

:hi:

[Dr.Phool]

9. Advanta went under last month.

They specialized in credit to small businesses. They closed all accounts.