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CIT Group preparing for possible bankruptcy

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posted on Jul, 11 2009 @ 01:41 PM
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Small business might get a bailout - so what? For an effective plan, these guys should have got money in the very first instance - the larger banks should have been allowed to crash and burn - but of course, there is way too much political influence tied up in them to allow it.

The problems with the US economy can't solved by domestic measures. The problem is the foreign debt, and the lack of exports. The interest alone can't be paid - so even if import demand drops to near zero (because of so many unemployed, and no money around) the outstanding balance of payments will still sink the USS Titanic.

The US is no longer able to extort free oil in the volumes it did before - its currency is being avoided in oil transactions - which was the source of the US debt.

The US has used the following tactic - force oil countries to sell in $US - that means free oil for the US, and also forcing other countries to export to the US to gain $US to trade for oil. The foreign countries would export at whatever cost to get $US - making stuff for virtually nothing. This is coming to and end - Chinese subs are following the US fleet everywhere

I don't see any recovery for the US economy in the next 5 years - and everything points to further falls and hardship.

Where is the cash going to flow? Into the only economies robust enough to survive what is happening, BRIC, central western Europe, Australia, maybe Canada - and maybe a handful of others. However, this is not going to be available for some, and not going to satisfy others - so commodities are going to be the easiest and fastest way to counter inflation and risk - so they are likely to explode - precious metals leading the way, followed closely by industrial metals. Obviously resource stocks in countries outside the troubled regions are going to look good too.

There seems to be very little to be done now for the US, UK, southern (Latin) Europe and Eastern Europe - all these economies are basically dead or on life support.




posted on Jul, 12 2009 @ 06:36 AM
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reply to post by Amagnon
 


Good post, I agree with you on almost all your points and the
ones I don't its really more like I am on the fence about it.

Most of what you are saying was predicted in the movie
Crude Awakening, and you can watch it on google video.

Dark days ahead for the US, and possibly the rest of the world.



posted on Jul, 12 2009 @ 11:11 AM
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We have so many small businesses failing that the future of the commercial real-estate markets are going to be effected next. With no rents to the building owners, they that have their property leveraged to buy other commodities whether its more real-estate or stocks that have already been hit are going to default on those loans. Here in my area, two of the largest players and builders of commercial properties are in trouble and with no tenants a few of our local banks are feeling the pinch. I'm sure other communities are in the same boat here!

Zindo



posted on Jul, 15 2009 @ 10:31 PM
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Gotta make this bump brief but looks like CIT is bankrupt and not in the "club" like C, BoA, and JPM.

I guess we know who was borrowing at 7% in the overnight market not too long ago now.

Lots of stories breaking on this, a good place where alot of them are already linked is here at the CIT page at yahoo finance.



posted on Jul, 15 2009 @ 11:30 PM
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And one more nail in their coffin, no bailout for them. Good!!!!!!!!! Shares were halted.

No bailout, no bullsh** (chant repeatedly)

money.cnn.com...

CIT: No bailout for us
Troubled small business lender, its fate in the balance, says it has been told not to expect a federal rescue soon. Shares halted late Wednesday.

By Colin Barr, senior writer
Last Updated: July 15, 2009: 7:11 PM ET

NEW YORK (Fortune) -- Cash-starved small business lender CIT Group said Wednesday evening that it has been told it won't be getting a government bailout anytime soon.

There is "no appreciable likelihood of additional government support being provided over the near term," the company said in statement. The CIT board and executives are evaluating alternatives.

Trading of CIT's shares was halted late Wednesday afternoon.

CIT (CIT, Fortune 500), struggling with souring loans and an inability to raise money in the markets, has spent recent days trying to persuade policymakers to lend the company a hand. It received $2.3 billion from the federal government's Troubled Asset Relief Program in December.

Strapped for cash and hit by a series of credit downgrades, the company reportedly hired lawyers last week to prepare for a bankruptcy filing. CIT shares have dropped more than 90% from their 2007 highs as the company's business has gone into free fall.

The crisis is forcing top officials in Washington to make yet another difficult political decision. Many legislators and taxpayers have voiced their anger about the numerous bailouts that have taken place during the two-year-old financial crisis.

The White House said President Obama has been briefed on CIT but referred questions to the Treasury Department.

"Even during periods of financial stress, we believe that there is a very high threshold for exceptional government assistance to individual companies," Treasury spokeswoman Meg Reilly said in a statement.

CIT didn't immediately return a request seeking comment.

CIT, with around $65 billion of managed loans, is just a fraction of the size of the financial titans -- ranging from Lehman Brothers and Washington Mutual to AIG (AIG, Fortune 500) and Fannie Mae (FNM, Fortune 500) -- that toppled last year. By comparison, the systemic fallout from a potential CIT failure appears minor.

But no one knows exactly how hard the firm's failure might hit the struggling economy. And with giant banks such as Goldman Sachs (GS, Fortune 500) having benefited over the past year from hundreds of billions of dollars of federal assistance, policymakers could find it untenable to force a self-proclaimed bridge to Main Street into bankruptcy.

"We believe not supporting the lender could carry with it the stigma that the government was more willing to bail out Wall Street than small businesses," analysts at research firm CreditSights wrote Wednesday.

CIT has sought permission to borrow money under the Federal Deposit Insurance Corp.'s debt guarantee program, but the agency -- already facing surging bank failures -- hasn't been eager to add to the burden on its deposit insurance fund.

In part, that's because CIT has always focused on less creditworthy borrowers -- and it has the writedown numbers to show for it.

Loan charge-offs -- representing loans written off as uncollectible -- tripled from a year ago to $313 million in the first quarter and are likely to keep climbing. "We expect non-accrual loans and charge-off levels to remain at elevated levels through the remainder of 2009," the company said in its first-quarter report filed with regulators.

Under CEO Jeffrey Peek, who took over in 2003 after stints at Merrill Lynch and Credit Suisse, CIT expanded beyond its traditional asset-backed lending business into hot areas such as home lending. The company pulled out of that business in 2007, but has been hit by rising loan nonpayments in its corporate finance segment, which includes small business lending.

CIT has long borrowed in the credit markets to fund its lending activities, but since the credit markets froze in 2007 the firm has had to pull back on its own lending.



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