The U.S. spurning of CIT group Inc.’s aid request suggests officials are betting they’ve fixed the financial system enough to withstand the bankruptcy of a mid-sized lender.
“I hate to say this, but it was probably expendable,” said Dennis Santiago, chief executive officer of Institutional Risk Analytics, a Torrance, California, research firm that studies systemic risk. “It may have just missed the boat” on federal rescues, Santiago said.
Yesterday’s decision to forego a lifeline for CIT came 10 months after Lehman Brothers Holdings Inc. filed for bankruptcy. Lehman’s collapse ushered in the depths of the credit crisis to date, and resulted in the establishment of a $700 billion bailout fund; officials yesterday indicated programs created with that money would help fill any lending gap left by CIT, Bloomberg reports.
Meanwhile, many of CIT Group Inc's businesses, including trade and transportation finance, could be of interest to potential buyers as the commercial lender stares at the possibility of bankruptcy.
But this is a bad market in general for CIT to be selling any assets as the economic downturn has hurt many of its markets badly, driving down values.
Disposals under distress would not only draw fire sale prices but could also lead to legal challenges down the road, investment bankers said, Reuters reports.
The consequences of a bankruptcy filing still could be severe. CIT provides financing to roughly 1 million companies, many of them already struggling to weather the recession. CIT estimated in its pleas for assistance that thousands of firms might be unable to survive its demise.
A bankruptcy filing also could wipe out the $2.3 billion that the Bush administration invested in the company in December as part of the government's $700 billion financial rescue program. CIT would become the first firm bailed out by the government to subsequently fail, Washington Post reports.
Russia, when signing documents for the sale of Alaska to the United States, was realizing her objective benefit
Putin's official spokesman Dmitry Peskov commented on remarks in the US media about failures in launching nuclear-capable missiles in Russia