The End for CIT Group?
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The ongoing saga at CIT Group seems to be coming to an end. From The New York Times, CIT Says It Won’t Get More U.S. Aid:
The survival of one of the nation’s largest commercial lenders, the CIT Group, was thrown into doubt late Wednesday after federal officials rebuffed pleas to rescue the struggling company a second time.CIT executives and their advisers held round-the-clock negotiations with government officials in recent days after customers staged what amounted to a run on the bank. Going into a board meeting on Wednesday afternoon, the company’s management expected to reach a deal, according to a person with direct knowledge of the matter. But a government official informed CIT that there would be no second rescue, this person said.
Apparently CIT Group doesn’t have the same political clout as other companies deemed “too big to fail”. CIT Group certainly isn’t too big to cause further problems in our economy.
“A failure of CIT would impact thousands of retailers and, consequently, the consumer spending that makes up two-thirds of our nation’s economy,” Tracy Mullin, the chief executive of the National Retail Federation, an industry group, wrote in a letter to the Treasury secretary, Timothy F. Geithner, earlier on Wednesday. “That cannot be allowed to happen at a time when retailers are already struggling to survive the national recession.”
Still, the quickest way out of this recession will be by letting these companies fail and allowing stronger companies to take their place. The moral hazard generated up to this point has already guaranteed crises in the future. Without a system where mistakes are punished, excessive risk-taking will continue to be the name of the game.
More on this topic
(What's this?)
CIT Rescue Shows Credit Isn’t Dead
(Investment U, 7/20/09)
Is CIT Group "Too Big To Fail'?
(Wealth Daily, 7/14/09)
Update: CIT Reaches Tentative Deal With Bondholders
(The Value at Risk, 7/17/09)
