The Wall Street Journal is reporting that CIT, a major lender to small businesses intends to file for bankruptcy protection in New York within days, perhaps as soon as this Sunday.
CIT had already received $2.3 Billion of tax payer funds to keep the company alive. Under the possible bankruptcy filing the money that came from the tax payers is at jeopardy of being completely lost for good.
[...] The $2.3 billion in taxpayer money spent to save CIT Group Inc. is likely to be wiped out, as the lender prepares to file for bankruptcy protection in a high-stakes restructuring plan aimed at keeping the firm in business.[...]
[...] With $71 billion in assets, CIT would have the fifth-largest bankruptcy filing in U.S. history, trailing only those of Lehman Brothers Holdings Inc., Washington Mutual Inc., Worldcom Inc. and General Motors Corp. CIT’s Utah bank, which has about $10 billion in assets, wouldn’t be part of the bankruptcy filing.
One loser from a bankruptcy would be the U.S. Treasury. Late last year it injected $2.3 billion of funds from the Troubled Asset Relief Program to help stabilize the lender, which was weighed down by billions of dollars of bad student loans and subprime mortgages. The government investment is likely to be wiped out, said people familiar with the matter. Common shares would likely drop to zero, too, these people said. [...]
[...] A filing could also be a blow to some of the tens of thousands of small- to medium-size businesses that are customers of the century-old lender. Unlike public corporations — which enjoy access to reinvigorated credit markets — small borrowers are finding capital remains scarce.
Even if CIT emerges intact, its lending capacity could drop to less than 20% of what it was two years ago, according to an estimate by Brian Charles, a debt analyst at R.W. Pressprich & Co. CIT made just under $40 billion in new commercial loans in 2007, not including an additional $45 billion for trade financing, according to company figures. That plunged to just $4.4 billion in the first half of 2009. [...]
(source: WSJ)

First the US Senate decides to kill the auto bailout bill sending the futures down significantly in the overnight hours.Then this morning we have the Whitehouse issuing a statement that they will intervene and ‘save the day’ pulling the market from the grips of hell. The Whitehouse does not yet know how they will bailout the automakers but they assured the market this morning they will. I imagine that when Hank Paulson heard the Senate killed the bailout he was very unhappy.