CIT's Problems Have Not Gone Away

It is very convenient to just assume all of the problems that plague the US economy have just disappeared. With all of this talk about the recession easing or ending, as some commentators contend, it is tough to take an objective look at what is going on around us. There is some hope that the recession is ending, and even I fall into that camp, but I am more grounded and expect it to last until year end, however there is a higher possibility that CIT Group (CIT) may still be filing for bankruptcy protection.

Many have assumed that this problem has been fixed, but it has not. The firm recently delayed its quarterly filing and new rumors are forming about a potential bankruptcy in the very near future. Even though the firm has received money from its bondholders it was not enough to make the problems disappear and it is suffering from, as the WSJ put it, a severe liquidity problem.

If CIT fails it, combined with 72 bank failures, a massive increase in personal bankruptcy and pick any other issue of the minute, is evidence of the continuing credit problems that plague or economy. These issues are not exactly systemic risks individually, but combined it is a direct indication of the problems we face. Of course, a great productivity report this morning is sure to make people feel better, even though the report just shows we are squeezing more out of fewer people.

Our troubles have simply been postponed or buried to a future date and it is my opinion that government intervention is going to prolong our problems, not fix them. No one ever wants to hear, hi, I am from the government and I am here to help, because the government only makes things worse. However, we are closer to the end than we are to the beginning of this thing and we will come out of it, but it is important to recognize the problems that are still there so you do not get sucked into believing everything is OK right now.

Comments

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2009 Aug 11 11:07 AM

[johnnysize]

CIT - Swap as much debt as you can for equity at a steep discount, attracting arbitrage investors, increasing the cost of stock loan, keeping a floor on the equity. Gee , ya think that might happen?

2009 Aug 11 12:36 PM

[deported]

I agree on CIT, I disagree with the assessment that government intervention has only hurt. However unpopular the bailouts were, an outright collapse of Citi or AIG or any other major institution would have sparked a disaster infinitely more horrible than our current calamity. Just look at what happened after Lehman was allowed to fail.

2009 Aug 11 01:23 PM

[avlamal]

it is totally ludicrous to believe the tender offer wont be successful;the delay has absolutely zero to do with this issue;it is common place to have delays when cos. go through very thorny issues such as this case;they r dotting i"s on a number of issues that must be included in the report , thats all;its really interesting to c how you lowlife paid basher coke whores grasp at straws like this delay of 10q report and pray for disaster;u will lose on this one ;expect 3 easily on news of tender success!

2009 Aug 11 03:37 PM

[avlamal]

it is totally ludicrous to believe the tender offer wont be successful;the delay has absolutely zero to do with this issue;it is common place to have delays when cos. go through very thorny issues such as this case;they r dotting i"s on a number of issues that must be included in the report , thats all;its really interesting to c how you lowlife paid basher coke whores grasp at straws like this delay of 10q report and pray for disaster;u will lose on this one ;expect 3 easily on news of tender success!

2009 Aug 11 03:37 PM

[holmesnmanny]

Little banks fail. Big banks, as has been shown time and time again do NOT fail. They either are bailed out or get bought out by other companies. That's the way it works. And that's the way it's gonna work with CIT.

2009 Aug 11 07:44 PM

[ERCaptain]

Deported is correct and this is the lesson learned from the Great Depression. The populist response right now is to hate all that is connected with govt intervention. Bernanke, a student of the depression, knows we could not repeat the terrible mistakes made during the depression.
CIT -- I, hope that the govt doe not let it fail. It is the backbone of financing for many small - mid size companies. The infrastructure for these types of loans is just not out there. The market would not be able to adsorb all of the debt capacity, and we would see large amounts of default for those companies. If their lines of credit dry up so do the businesses, the related employment, and the positive multiplier effect of dollars in the economy.
I just no longer have any confidence at all that the executive branch is driven by anything other than political expediency and opportunism. If too many small businesses tended to lean republican last election cycle, then they are in big trouble. CIT won't get the money. Mom and Pop businesses are on the street, and we will NEED the government to take care of us again.


On Aug 11 01:23 PM deported wrote:

> I agree on CIT, I disagree with the assessment that government intervention
> has only hurt. However unpopular the bailouts were, an outright collapse
> of Citi or AIG or any other major institution would have sparked
> a disaster infinitely more horrible than our current calamity. Just
> look at what happened after Lehman was allowed to fail.

2009 Aug 12 04:27 PM

[apppro]

Whether I disagree with you BASE assumptions or not, I CANNOT agree or even appreciate your inflammatory headlines with no real NEW news or verifications.
Basically, your entire article is based on 'your GUT' and personally I really don't care to read about your lower digestive issues.

I would not be so criticle if your title had read:
"My bowel movements are telling me that CIT's Problems Have Not Gone Away"

2009 Aug 13 09:24 AM

[avlamal]

once again i am right;what a bunch of bullshit this article was

2009 Aug 17 01:29 PM