CIT needs debt-holders to pay up

Mitchell Hartman Jul 16, 2009
HTML EMBED:
COPY

CIT needs debt-holders to pay up

Mitchell Hartman Jul 16, 2009
HTML EMBED:
COPY

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.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.