OBAMA SHOULD SAVE CIT

CIT Group Inc. has been the number one Small Business Administration (SBA) 7(a) lender for nine consecutive years. They have also been the top lender to women, minority and veteran owned small businesses for six consecutive years. CIT has been a lender to roughly one million small and mid-size businesses. Without help from the federal government CIT could face a very serious challenge to their future that may include bankruptcy.

President Obama should not let that happen for several good reasons.

America's small businesses are responsible for approximately 50 percent of the gross domestic product (GDP). According to the latest U.S. Census Bureau data, small businesses with less than 100 employees are responsible for over 97 percent of all net new jobs in America. These firms employ over 56 percent of the private sector workforce and are responsible for the majority of technical innovations. Small businesses are unquestionably the foundation our of national economy.

These are the firms CIT has been serving since 1908. CIT makes successful loans available to thousands of hardworking small business owners that had been turned down repeatedly by other lenders. CIT's unique ability to work with new entrepreneurs and small business owners trying to expand their businesses will be impossible to duplicate.

CIT received $2.3 billion in TARP funds. As far as I know, they didn't use the money to give their top executives millions in bonuses, buy a new corporate jet or spend a million dollars remodeling the president's bathroom like many firms in their industry.

I admit, I am not an economist and the detailed and complex inner workings of the financial industry are not my area of expertise. I am a hardcore small business advocate and a taxpayer. If my tax dollars are going to be used to rescue banks and other financial institutions, CIT is the kind of firm I want to see saved.

It looks like President Obama and the people in his administration get to decide who succeeds and who fails in the financial industry. In making those life and death decisions I believe President Obama would be wise to consider the crucial role small businesses will play in our nation's economic recovery. Over 50 percent of the GDP and over 95 percent of all net new jobs are very compelling statistics in favor of supporting America's 27 million small businesses.

President Obama recently rolled out his ARC loan program that will provide interest free $35,000 loans to small businesses. The program is capped at $255 million. CIT made $770 million in loans under the SBA's backed loan program in 2008.

If you consider the total volume of federal funds that have been allocated to stimulate the nation's failing economy, the figure is over $2.5 trillion. To date, the nation's 27 million small businesses have received less than 1 percent of those funds. To help put that in perspective, more tax dollars have gone to help J.P. Morgan than all American small businesses combined. The Wall Street executives that helped create the worst national economic disaster since the Great Depression have received more money than 27 million small businesses, over $18 billion in bonuses.

If our economy is going to recover any time soon, President Obama needs to come to the realization that small businesses will lead the way out of this recession, not Wall Street and not Fortune 500 firms. Politicians in Washington pushed the Wall Street bailout bill and the American Recovery and Re-Investment Act by saying small businesses need access to capital. The truth is, and has been widely reported, that access to capital for most small businesses has actually decreased.

An effective economic recovery will require lenders like CIT to get money into the hands of qualified small businesses.

If our hard earned tax dollars are going to be used to save financial institutions, we should use those funds to save firms like CIT that have a 100-year track record of helping those small businesses where most Americans work, the businesses that are responsible for over 50 percent of the GDP and create over 97 percent of all net new jobs.

President Obama needs to invest our tax dollars wisely and I can't think of a better use for those funds than to invest in a firm like CIT that has been the nation's top lender to small businesses and firms owned by women, minorities and veterans.

Follow Lloyd Chapman on Twitter: www.twitter.com/LloydChapman

Comments

[Read2know]

It does not look good if CIT is not helped. Who will provide the loans needed by small businesses to help our economy recover?

[SBBeliever]

Thank you for writing about this! A firm like CIT with such an extensive track record in working with small businesses is exactly the kind of firm we want to see stay in business. Thank you for writing about this and bringing this issue to light. Small businesses and the firms like CIT that support them need as much help as possible right now - hopefully this will get a lot of support from citizens like you and me. We need our politicians to stand up for "we the people", not "we the stockholders".

[shabink]

Jeff Peek and the rest of the Executives need to be removed from their duties first. They are the reason the company is in a bad shape. Bad judgement and the thurst to turn CIT into a giant, is why this company has been going down hill for the past 3 years. They were in trouble in early 2007 and sinking fast.
The billion dollar building they built in New York City was the biggest waste of money. Not to mention Jeff Peek's 500k video productions anytime he spoke outside of the NYC office. His million dollar video studio and other excessive perks sent 200 plus jobs to India (many of the displaced have been out of work for more than a year) and thousands more just layed off and business units shutdown due to poor management and unnecessary risks.
CIT executives are no different than the rest who had hands out for money. Peeks Office in 505 5th ave cost more than most of our houses. A change needs to happen up top if you think Government bailout money is going to help them.

[kevlar0076]

I think you make a very valid point about the excesses of CIT's executives, similar to what we have seen with the auto companies and the wall street firms, perhaps if we bailout CIT then that should include the removal of their leadership, who obviously have not done a good job in running the company. My main concern is a void that will be left if CIT goes under that will leave small businesses in need of loans in the lurch

[Ashki]

when I was young, I was never a fan of paying taxes. Over they years I have come to know that my tax dollars help keep America safe and provide a bright future for my family and I. I do not appreciate paying taxes to give executives bonuses nor helping out large businesses that "coincidentally" are the largest government contributors. I like to know that my tax dollars are doing the best they can. Since a lot of smart people are saying "small business is where America works," lets give that a try. We have tried the other way and dropped TRILLIONS as if it were a drop in the bucket. How about we try something that has a chance to work. Lets push for CIT.

[kevlar0076]

Here we go, now we will see how much the administration really values small businesses. So it seems fine to give AIG and JP Morgan hundreds of billions in our money, but a company that actually makes a difference in helping small businesses will probably be left out to fail.

Hey Obama, here is your chance to show your support for small businesses - what are you going to do?

[smbizadvocate]

This sounds about right. Give the Fortune 500 corporations the majority of the tax payer money so they can continue to reward themselves for the wonderful job they did on bankrupting their business and fire more employees. Give companies like CIT less than 1% of the "bailout funds", so hundreds of thousands of smaller businesses that create almost all of the new jobs go out of business so the economy falls deeper into a depression and more American's lose their jobs.

Great plan! I am so proud of our country for always doing the right thing.

[jperrino]

Lloyd, as always thanks for all the hard work you do for small businesses across the country!!