It looks at the moment that CIT, the big finance company, will file for bankruptcy as early as Monday morning. Their appeals to the federal government for bailout financing have been met with a firm NO! answer. Because CIT has no debtor-in-possession financing arranged and little chance of accomplishing that, it would appear that CIT will probably be liquidated, either purchased by another financial institution or broken up in pieces and sold off.

CIT's failure will have widespread effects on many small and medium-sized businesses to whom CIT provided financing. They too will find themselves in a position of having no source of debt financing to continue their operations.

Here's an article describing how CIT got to where it finds itself.

http://online.wsj.com/article/SB1247...ml#mod=testMod

As painful as this might be, the fed's NO! answer is almost certainly the right one. (IMHO, at least.)

Originally Posted by Villages Kahuna

It looks at the moment that CIT, the big finance company, will file for bankruptcy as early as Monday morning. Their appeals to the federal government for bailout financing have been met with a firm NO! answer. Because CIT has no debtor-in-possession financing arranged and little chance of accomplishing that, it would appear that CIT will probably be liquidated, either purchased by another financial institution or broken up in pieces and sold off.

CIT's failure will have widespread effects on many small and medium-sized businesses to whom CIT provided financing. They too will find themselves in a position of having no source of debt financing to continue their operations.

Here's an article describing how CIT got to where it finds itself.

http://online.wsj.com/article/SB1247...ml#mod=testMod

As painful as this might be, the fed's NO! answer is almost certainly the right one. (IMHO, at least.)

Sorry VK, this is not a site I subscribe too but will trust you to give us a fair analysis ! I had read that folks paying down their cc bills had an impact but surprised this big !

Originally Posted by Villages Kahuna

It looks at the moment that CIT, the big finance company, will file for bankruptcy as early as Monday morning. Their appeals to the federal government for bailout financing have been met with a firm NO! answer. Because CIT has no debtor-in-possession financing arranged and little chance of accomplishing that, it would appear that CIT will probably be liquidated, either purchased by another financial institution or broken up in pieces and sold off.

CIT's failure will have widespread effects on many small and medium-sized businesses to whom CIT provided financing. They too will find themselves in a position of having no source of debt financing to continue their operations.

Here's an article describing how CIT got to where it finds itself.

http://online.wsj.com/article/SB1247...ml#mod=testMod

As painful as this might be, the fed's NO! answer is almost certainly the right one. (IMHO, at least.)

I agree, but there is definitely more to this story.

Mr. Peek joined the Board of Directors for Freddie Mac in 2005, and two lears later resigned from the board, citing his desire to avoid the appearance of conflict-of-interest in connection with a proposed purchase by Freddie Mac of securities backed by a portfolio of CIT residential mortgage loans. "Jeff's experience and insight have been enormously valuable to Freddie Mac and to the success we have had in building our shareholder value and fulfilling our housing mission," said Richard F. Syron, chairman and CEO, Freddie Mac. (http://www.freddiemac.com/news/archi...signation.html)

Whether there were political implications (as some reporters allege) to the "no to CIT" decision or not, the aroma surrounding CIT and Freddie Mac and Mr. Peek regarding the residential mortgage mess is no Chanel No. 5.

so I know the stock is worth like 70 cents, but it went up 29%on Friday, is there some private firm interested - that's what I thought.

Originally Posted by conn8757

...is there some private firm interested?...

I'd be willing to bet that there is more than one firm, either another financial institution or maybe a private equity firm that will be willing to buy all or parts of CIT for a deep discount on it's recent equity value.

That's not to say that CIT will continue to lend in all the industries and on the same terms that it has until recently. My guess is that a new owner will cut back or eliminate doing business with riskier borrowers, in riskier industries or using riskier loan structures--like continuing to lend to small businesses, as an example--or will dramatically increase the cost of borrowing money from them.

What a new owner is buying is the staff and the asset origination capability of CIT, which is significant. At a deep enough discount a new owner would have plenty of time to make the changes that would return CIT to a less risky and more profitable business model.