CIT needs debt-holders to pay up
TEXT OF STORY
Stacey Vanek-Smith: More bad news from CIT: the company says this morning that the U.S. government won’t give it any more money. CIT is a source of funding for thousands of small and mid-size businesses, and it says it’s desperate. Mitchell Hartman reports.
Mitchell Hartman: CIT has given its current debt-holders 24 hours to come up with $2 billion in emergency financing or else. The “or else” is probably a trip to bankruptcy court.
CIT has been trying without success to negotiate a government assistance package. That would be on top of the $2.3 billion it got from the TARP bank-bailout program. Chances are, taxpayers are out that money if CIT goes under.
The FDIC and Treasury are concerned CIT doesn’t have a viable business plan. But regulators have apparently concluded it’s not too big to fail and doesn’t pose systemic risk to the financial system.
CIT has more than a million customers. It provides credit lines that allow businesses to float their current operations. In the past few days, businesses have been drawing down those credit lines fearing that CIT might go bankrupt, creating a “run” on the bank.
I’m Mitchell Hartman for Marketplace.
Vanek-Smith: If CIT does go bankrupt it would be the largest financial firm since Lehman Brothers that the U.S. government has allowed to fail.
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