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Rubicon Associates is headed by a Chartered Financial Analyst with over 20 years of experience in the investment management industry focused on the analysis, investment and management of fixed income and preferred stock portfolios. Over the years, he has analyzed and invested in both public and... More
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  • CIT - Welcome to Government Bureauracy 0 comments
    Aug 13, 2009 11:50 AM | about stocks: CIT
    From CITs agreement (announced this morning) with the FRBNY:

    • Within 75 days of this Agreement, Bancorp shall provide the Reserve Bank with a written plan (the "Corporate Governance Plan") outlining the specific actions Bancorp will take, including timeframes, to strengthen Bancorp’s management and corporate governance consistent with the responsibility of Bancorp’s board of directors to effectively and adequately oversee Bancorp’s senior management and business affairs.
    • Within 60 days of this Agreement, Bancorp shall submit to the Reserve Bank an acceptable credit risk management plan to address and correct weaknesses identified by the Reserve Bank in Bancorp’s risk rating process and to improve the accuracy of assigned credit risk ratings (the "Credit Risk Management Plan").
    • Within 60 days of this Agreement, Bancorp shall review and revise, as appropriate, its consolidated allowance for loan and lease losses ("ALLL") methodology to assure that it is consistent with relevant supervisory guidance, including the Interagency Policy Statements on the Allowance for Loan and Lease Losses. 
    • Within 15 days of this Agreement, Bancorp shall submit to the Reserve Bank an acceptable written plan (the "Capital Plan") to maintain sufficient capital at Bancorp, on a consolidated basis, and at the Bank, as a separate legal entity on a stand-alone basis. 
    • Within 15 days of this Agreement, Bancorp shall submit to the Reserve Bank an acceptable written plan designed to improve management of the consolidated entity’s liquidity position and funds management practices (the "Liquidity Plan").   This includes:  a longer-term funding plan that includes strategies that do not rely on U.S. government funding programs or regulatory or supervisory waivers or exemptions;
    It also includes:
    Bancorp and its nonbank subsidiaries shall not make any distributions of interest, principal or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank and the Director.

    Keep in mind that CIT has already shut off its CIT A preferreds (due to their agreement with the "steering committee").  Now it shuts off its TRuPs and subs.  They will only be paying on their senior debt.

    and

    On an ongoing basis, Bancorp shall promptly provide the Reserve Bank with the following reports as they become available: (i) minutes of the meetings of Bancorp’s board of directors; (ii) minutes of the meetings of the audit and risk management committees of Bancorp’s board of directors; (iii) minutes of the monthly meetings of the asset liability committee; (iv) minutes of the quarterly meetings of the capital committee; (v) daily cash position reports; (vi) weekly parent-only cash flow forecasts; (vii) weekly consolidated cash flow forecasts; (viii) daily liquidity update reports showing client funding requests and loan/credit collections by business segment, business unit, and by facility type, ongoing initiatives on new funding and asset sales, and derivative terminations; monthly reports of debt maturities; (ix) enterprise risk management reports; (x) rating agency action releases; (xi) reports of all contacts and discussions with rating agencies; (xii) secured borrowing facilities reports; (xiii) monthly reports of margin sensitivity analysis; (xiv) monthly reports of business segment income; (xv) standardized board and board level committee liquidity risk management reporting packages; and (xvi) monthly derivative valuation reports.

    Given all the reporting they will be doing, will they have time to actually run their business?

    Disclosure:  Long CIT preferred and senior.
    Stocks: CIT
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