Wonder what the markets will do about this tomorrow. For me my guess it will do nothing over it, due to the fact that the markets aremanufactured these days anyway. But the fall of CIT might be the begining of the Commercial real-estate collapse.

What is the difference between CIT group and CITI group and how it effects one or the other.

Originally posted by charlie0

What is the difference between CIT group and CITI group and how it effects one or the other.

I'm not as savy as most here when it comes to American companies. But if I am correct they are not the same company. I could be wrong though.

CIT is a major lender to small business and such. So, I'm thinking this could be bad as it could destabalize the already fragile commercial real-estate bubble.

Funny thing is, I can easily see the markets up tomorrow as the big wigs there are going to say this was forseen for a while and the market has already adjusted to it. So you know it's not a big deal and all is rosey and the recession is still over.

Come on now people buy, buy, buy. All is well in the world (sarcastic words btw)

In my honest opinion, the government should have bailed out CIT.


Being an economy and finance major, this bankruptcy truly scares me.

i know corporations taking tax payer money is frowned upon by many, but this will have a monsterous impact on the economy.
Its a matter of choosing the lesser evil, really.

but we spent too much money on a failed stimulus package and bailing out other companies who failed before CIT.

CIT Group is a major lender for business equipment loans to small businesses. Same line of business as GE Capital, IBM Credit, etc.

Don't confuse the CIT Group with Citigroup/Citicorp. Two different businesses altogether, and completely unrelated.

The demise of CIT Group, and any of these lenders for that matter, be they banks, private finance firms, etc., is actually not a bad thing. You're getting rid of overly aggressive lenders that made reckless credit decisions. This is the end result of loosey-goosey, high risk, speculative lending to unqualified borrowers.

Now, there will hopefully be a return to intelligent, rational credit decision-making on behalf of our financial institutions, as a lot of the loosey-goosey lenders have gone bankrupt. Hopefully, the reckless behavior of our banks and financial institutions will have ended for good.

Will it affect small businesses? In the short run, yes. Credit is already tight enough as it is, and small businesses are going to have a hard time finding lending facilities.

Cash is king right now, and most entrepreneurs are clever enough and agile enough to navigate through these treacherous waters. Those that don't, won't be in business. This is where frugality, discipline, and avoiding debt pays off for the small business owner. Those business owners that went on a credit binge will likely shut their doors.

In the long run, however, businesses that operate without credit - and there are plenty of them out there (even big businesses) - are a lot stronger financially than businesses that have way too many loans. Over-leveraged borrowers are beholden to their lenders when the economy sours. Not a good way to run a business.

I look at the demise of our financial institutions as tragic, albeit necessary. In the short term, it will be very, very painful. But we're getting rid of a lot of reckless banks, lenders, and financial institutions that were way too lenient in their credit criteria. And the business owners that went on a credit binge will soon see their businesses fail. Tragic, painful, but necessary.

Zosy - No, not at all a rosy, optimistic outlook. Quite the contrary, mon frere.

I actually agree with you - to an extent. Yes, most businesses and most individual consumers are in way over their heads. Even large companies, as you suggest.

However, there are some individuals that are cash-rich, and debt-free. They are the minority. Rare individuals, but they are managing to survive the turmoil right now, and will likely be the ones that make it through this recession just fine. Who do you think is buying real estate these days? Cash-rich investors. People without much debt.

In terms of companies, believe it or not, there are some brand name companies that don't carry much debt. Microsoft, Texas Instruments, Fastenal, Apple Computers, T. Rowe Price. They are out there, and they are most likely to weather the storm. And what a storm it is.

Laugh as you like, but the only banks and lenders that are going to survive are the ones that made sound, conservative lending decisions to qualified borrowers. All the loosey-goosey lenders are toast - Most have already filed bankruptcy.

So, yes, you will see a return to rationality in the lending world. It's already happened, and will continue to happen as the weak lenders are replaced with the strong, cash-rich banks with sound operations and prudent lending standards.

How many banks have to fail before you realize that this is true? How many crappy banks have to fail before you see that the stronger, more conservatively run banks are prevailing over the banks that lent too aggressively?

Generally a good post, but I think you underestimate how harsh the deleveraging will be, and how many people and companies will be deeply, and negatively, impacted.

Re-read my post. I am fully aware that it is going to be a very painful process, and a lot of people and companies are going to get wiped out. That's the reality.