Thursday, July 09, 2009

CIT Going Down? "Not Big Enough"--So Fail?

We mentioned the other day that while GECapital (and GMAC) enjoy some Federal assistance, CIT (a competitor in the finance business) does not. Technically, the assistance is FDIC guarantees of debt.

It's easy to figure out why the Feds are backing GMAC. And GE's bowing-and-scraping to Obama (and its sophisticated and expensive lobbyists) probably helped GE get into the 'magic circle.'

CIT Group Inc., the century-old lender to 950,000 businesses, is trading in the bond market as if it may fail.

Since becoming a bank in December to qualify for federal help, CIT has lost all three of its investment-grade ratings. Yields on its bonds are comparable to securities rated on the brink of default on concern CIT won’t get approval to sell U.S.- backed bonds under the Temporary Liquidity Guarantee Program to refinance $10 billion of debt coming due through next year

...CIT hasn’t had access to the corporate bond market in more than a year, while the government allowed competitors from General Electric Co. to GMAC Inc. to sell U.S.-backed debt during the worst credit crisis since the Great Depression.

CIT does stuff that GECapital and GMAC do not do: CIT finances small retail enterprises, both directly and through its large SBA program. But it certainly is not as big as GECap or GMAC.

CIT reported $75.7 billion in assets and $68.2 billion in liabilities, including $3 billion in deposits, at the end of the first quarter.

So we have an interesting question: is CIT not big enough, therefore destined to fail?

Before you answer that question, think hard about CitiBank, folks, and what may well be a 'concentration of influence' dominated by Barack Hussein Obama.

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