CIT Group to Move on After Peek

The resignation of the CIT Group's (CIT) chief executive Jeffrey M. Peek is very bad news for the finance and leasing industry. It will make credit tougher to obtain, and definitely more expensive, lengthening the recovery for small business in the United States, culling out the market place in a faster pace than Leasing News writers have been predicting. This is terrible news.

On July 13, Leasing News printed an editorial regarding support for the CIT Group: "It is imperative that the finance and leasing industry show support for a company that has supported so many small businesses; enabled them to grow, to support their families, to provide jobs, to keep the economy growing."

There have been many stories regarding this company, once a giant of the commercial finance industry with 7,500 employees worldwide. Many of its key commercial credit employees retired in the 1980s and 1990s, including some into 2000, and there was a major shake-up including the loss of some major department heads such as Walter Owens, president of corporate finance; Rick Wolfert; and Thomas Hallman.

Despite any criticism about Peek's performance in the past, his efforts the last 12 months will be studied in university business classes for many years to come. He and his staff have earned their salary and more. CIT is an excellent team and should be congratulated, even today, for trying to keep the company together. No other group could have survived as long as they have with so many adversaries.

One of the key downfalls was the selling of better assets, particularly the partnership with Dell (DELL) which helped make Michael Dell a billionaire. According to a highly reliable insider, the CIT finance group at one point had 15 employees in Austin, Texas and at last count were down to two.

Bondholders, creditors believe more will be gained in a bankruptcy. (Up to 82.5% of their investment upon liquidation if the company goes into bankruptcy, says Egan-Jones.) Along the way, they reported Wells Fargo (WFC) and others have borrowing power and cash from the government to "save" CIT. In all the lawsuits, you would think the investors would have learned, but in reality it's like a fish bowl where the larger fish eat the smaller fish.

Mentioned as successors besides Wells Fargo are Berkshire Hathaway (BRK.A), General Electric and PNC Financial (PNC). There are others, of course, off shore, who would like to "steal" the accounts and infuse with a better cost of funds to attract more business.

Certainly the old adage has never been truer: the person with the gold makes the rules.

Disclosure: No Positions

Comments

[User 500278:]

Peek buried CIT in incredible debt and now he riding off in the Sunset with Millions of dollars in severance pay.

I want a job where I can bury a company in hugh debt and be generously rewarded for it.

Oct 15 01:42 AM

[baz518:]

Whoever wrote this must be Peeks best friend. He ruined CIT... moving the headquarters to Manhattan, getting into student loan lending are just a few of the stupid mistakes he made. The only reason this company is still alive is because bondholders and lenders think they can make a ton of money, not because of the management at CIT. That management team is at the mercy of anyone who will lend them money. Common shares are dead... if you can't buy bonds, buy the Equity Units (CITpZ) in lots of 40, otherwise stay away.

Oct 15 08:49 AM

[pcyhuang:]

May CIT be revitalized by the potential of the recycling of TARP Funding?

" ...Far from being out of ammunition, the government still has about 75 percent of the $787 billion Congress appropriated to spend during the next two years." -- Slate.com

Hopefully that the government will recycle the returned TARP funding towards revitalization of the securitization market and muni bond insurers like ABK and MBI, and perhaps also other second tiered financial institutions like Etrade and the CIT Financial Group.

Oct 15 10:03 AM

[xcit:]

Wow, what a bunch of BS.

As a former CIT employee, I know Peek was horrible. More interested in moving from NJ to NY wearing a CEO badge then running the company. Any how about the 2.1 billion taxpayer TARP money he lost. Also rarely mentioned, is all the jobs that have been sent overseas, with no real savings to the company. And as others have said, he will be handsomely rewarded for ruining the company and make many people's live pure misery and the end of his reign of arrogance and incompetance.

Could this have been written by his wife? Do a search on TARP wife to see how these people think.

Oct 15 01:44 PM

[chuck2251:]

I CALLED CIT TO SEE WHY WE WERE DENIED CREDIT WITH A VENDOR.I WAS TOLD BY A MR. FOSTER THAT OUR ACCOUNT HAD BEEN CLOSED FOR THREE YEARS. I TOLD HIM THIS IS SIMPLEY IMPOSSIBLE. WE HAVE CREDIT WITH SEVERAL VENDORS THEY FACTOR.WE HAVE PAID TEN OF THOUSANDS OF DOLLARS THE LAST TWO YEARS. WE HAVE CREDIT WITH A VENDOR WHO IS A CLIENT OF CIT.I HAVE ASKED MR. FOSTER TO FORWARD HIS INFORMATION ON OUR COMPANY SEVERAL TIMES TO NO AVAIL.IF THEY CANT MANAGE OUR SMALL ACCOUNT,PLEASE DONT GIVE THEM MY TAX DOLLAR.

Oct 15 02:35 PM

[jimmy46:]

the idiot who wrote this must be brain dead.

Oct 15 02:47 PM