This comes from the Wall Street Journal:
Small-business lender CIT Group Inc. said "there is no appreciable likelihood" that it will receive fresh government support, suggesting that the company might instead seek to file for bankruptcy protection.
In a written statement issued after the market close, the company said it was "evaluating alternatives."
The company has been locked in talks with government officials and regulators during the past week in a bid to prop up its business. The reason for the lack of success in the negotiations couldn’t be immediately learned.
I’ll tell you what I think it is: CIT is not a well-connected Money-center bank. It is merely a lender to small-and medium sized businesses. So, that makes the Obama Administration opposed to giving it a helping hand. Only the big banks deserve bailouts, apparently. Just ask Chrysler, GM or California. CreditSights says much the same thing.
"We believe not supporting the lender could carry with it the stigma that the government was more willing to bail out Wall Street than small businesses," analysts at research firm CreditSights wrote Wednesday.
Meanwhile, the beleaguered financial supermarket Citigroup is near a ‘secret deal’ with regulators about how to increase regulatory scrutiny of the company. See the FT story here.
Despite my snarkiness, I do agree that CIT should fail. No more bailouts. So, the Obama Administration is doing the right thing. But, of course, these decisions are always fraught with risk. Consider this Obama’s Lehman Brothers. Right now, all is well though, as today was a major market melt-up despite the halt in CIT shares this afternoon.
Below are some other takes on the same:
US stock and bond futures little changed after CIT statement – Reuters
CIT Says U.S. Support Unlikely, Studies Options With Advisers – Bloomberg
Obama Administration Denies Aid to CIT Group – Washington Post
CIT’s press release on the matter were pretty brief:
CIT Group Inc. (NYSE: CIT), a leading provider of financing to small businesses and middle market companies, today announced that it has been advised that there is no appreciable likelihood of additional government support being provided over the near term.
The Company’s Board of Directors and management, in consultation with its advisors, are evaluating alternatives.
Individuals interested in receiving future updates on CIT via e-mail can register at https://newsalerts.cit.com.
I guess they are more concerned about talking with their lawyers at Skadden Arps about bankruptcy, which is pretty much a lock at this point.