The impact of CIT’s bankruptcy
TEXT OF STORY
Bill Radke: We wake up this morning to the 5th-biggest bankruptcy in U.S. history. It’s CIT Group — a century-old company that may not be as well-known as Washington Mutual or General Motors. But it matters a whole lot to small- and mid-sized companies that use CIT as a primary source of cash to fund their operations. Marketplace’s Mitchell Hartman reports.
Mitchell Hartman: CIT is the primary lender to hundreds of thousands of manufacturers and retailers — from Eddie Bauer to Dunkin’ Donuts. So its Chapter 11 bankruptcy filing means a lot as the economy is coming out of recession and heading into the holiday shopping season. Many of these businesses are already struggling to find banks that will lend to them or extend lines of credit.
Bob Coleman publishes The Coleman Report on small-business lending. He says CIT’s problems with subprime mortgages have already caused the bank to cut way back.
BOB COLEMAN: They are down over 80 percent in 2009 versus 2008. And that translates all across the tens of thousands of small businesses that they service.
CIT’s goal, with the blessing of investor and bondholder Carl Icahn, is to emerge from bankruptcy by the end of December. And to keep its business lending going during that time.
The biggest losers are stockholders and the U.S. Treasury, which pumped $2.3 billion in bank bailout funds into CIT. That money is probably lost.
I’m Mitchell Hartman for Marketplace.
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