CIT Group Talks Bailout With Regulators

CHARLOTTE, N.C. — Shares of diversified lender CIT Group Inc. plunged Monday even as U.S. Treasury Secretary Timothy Geithner indicated there could be help for the ailing company.

The company's shares fell nearly 23 percent in morning trading after dropping 18 percent in heavy trading Friday amid uncertainty over federal aid.

Geithner, while in London, said Monday he was confident the government has the authority and the ability to address the crisis at CIT.

"I am actually pretty confident in that context that we have the authority and the ability to make sensible choices," Geithner was quoted in response to a question about how the U.S. government might deal with CIT. The Treasury confirmed the comment.

CIT said it is still in talks with regulators on ways to improve its near-term liquidity as recent losses may jeopardize its compliance with capital requirements.

The company, which in April posted a wider-than-expected first-quarter loss, said late Sunday that it will talk with regulators about the possibility of participating in the Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee Program.

The program would let the New York-based financier to small and mid-sized businesses issue government-backed bonds to raise capital at a lower cost. As of June 8, the program has backed $335.4 billion of debt.

CIT already received $2.3 billion in government bailout funds in December, as part of the $700 billion rescue fund created by Congress last October. It had to convert to a bank holding company to access the money.

Story continues below

advertisement

CIT, like many other financial firms, has been hit hard by the ongoing credit crisis as investors have shied away from purchasing all but the safest forms of debt, leading to a near disappearance of funding options.

If CIT is unable to receive access to the TLGP program it would have to find alternative funding that would likely need to be secured by its assets.

The lender faces maturing debt of $7.4 billion in the first quarter of 2010, plus other obligations. CIT could issue debt without government backing to help it in the near term, but it has to carry a high yield to attract investors.

CIT has said it is also considering the possible transfer of assets into CIT Bank as well as the transfer of its vendor finance and trade finance businesses into the bank.

The company, which has faced a series of downgrades by ratings agencies recently, said there is no guarantee that its discussions with regulators will result in any action. Lower credit ratings make it more expensive to borrow money and can make it difficult to attract investors.

While not as well known as the big commercial banks, government officials have said CIT is not a systemic risk to the financial system, as other lenders could step in to provide loans and services to CIT's client base. Among its customers are small and mid-sized businesses.

CIT shares dropped 33 cents, or 21.6 percent, to $1.20 in morning trading Monday after sinking to a new low of $1.08. They are down from a 52-week high of $13 on Sept. 19, 2008.

Comments

[Christian]

Close it - sell it! End of story.

[mjtaylor22]

pl stop leaving tax payers out of the equation, it should be obvious by now that helping these fims, is not creating jobs they are just concerned with their bottom line, and their executive bonuses.
stop givign them our money and help the taxpayer stay intheir homes for real. they keep leaving it up to the free markets to re hire folks, no no no, they obviously do nto even care abt their own employees who continue to be laid off on all levels, and are threatened with additional layoffs, i am talking about all these corps, the bigger they are the more greed they have the more damage they intend,

[mjtaylor22]

please take them over chopp them up and sellthem off, that is how you bailout a failed firm,
not by throwing all oru money at it, too big to fail my a z z, let them fail becaus ethe taxpayer is being left in the streets everyday, bump it, let fall down aroufntheir ears, or they will be asking for AIG type bonuses after their effort to destroy our economy.

[pat8942]

If they can't make it on their own, let them fail.
I doubt if the demise of CIT would make much difference one way or the other.
It seems that getting the American people working again isn't a high priority to the Government, but saving a failed bank is a top priority.
Meanwhile Goldman Sachs is playing the same old risky game that started this and if they lose big the Government will save them again, because they're to big to fail.
Instead of passing out money maybe some regulation would do more to stabilize the banks.

[fcsakes]

NO.

[spinns17]

ask goldman sachs for a loan .

[Scot2]

If Glodman Sachs is making all this money, surely they can help other institutions of the same ilk.

[DaveyDavey]

NO.