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No ‘Get Out of Jail Free’ Card for CIT

Posted by Larry Doyle on July 10, 2009 11:37 AM |

Green shoots? Stop the madness.

Despite all the disguises and shams perpetrated on the American taxpayers to this point, the simple fact is our economy is awash in excessive debt. The inability to refinance debt will be with us for a while. No company is more reflective of this dynamic than CIT.

Who and what is CIT? You should take the time to quickly study this company because it may very well be the linchpin that drops and causes the next leg down in our economy.  Are they too big to fail?

From the CIT corporate web site:

CIT (NYSE: CIT) is a bank holding company with more than $60 billion in finance and leasing assets. For more than 100 years, CIT has provided lending, advisory, and leasing services to small and middle market businesses guided by unparalleled industry expertise and focus. Headquartered in New York City, CIT is a Fortune 500 company and member of the S&P 500.

CIT operates CIT Bank, a full service Utah state bank, which is regulated by the Utah Department of Financial Institutions and the FDIC.

Deep industry expertise

Operating in more than 50 countries, we have deep expertise across 30 industries. Our areas of expertise are:

Corporate Finance is a top 10 lead arranger for small and middle market level loans (less than $150 million) with more than 3,000 customers. Businesses include Commercial & Industrial, Communications, Media & Entertainment, Energy, Healthcare, Investment Banking Services, and Small Business Lending.

Trade Finance is a leading factoring company in the U.S. with customers in the U.S., Canada, Europe and Asia.  CIT factoring services provides funding to thousands of small manufacturers which, in turn, sell to small and large retailers that also rely upon CIT for the flow of goods into their stores.

Transportation Finance is the third largest rail car leasing firm in the U.S. with more than 116,000 railcars and the third largest in aircraft financing worldwide with over 100 commercial airline customers and more than 300 business air customers.

Vendor Finance is the #1 independent leasing company in the U.S. serving more than 500,000 commercial end customers ranging from small businesses to Fortune 500 companies. It maintains customer relationships with a variety of marquee technology and office equipment companies providing trusted business equipment leasing.

Commitment to small business and the middle market for more than 100 years

Since 1908, CIT has driven success by delivering three types of capital to clients. We believe that the combination of relationship capital + intellectual capital + financial capital can yield infinite possibilities for our customers.

Relationship Capital: Our employees and the long-term partnerships they have created with thousands of clients are our biggest asset.
Intellectual Capital: We understand that it takes more than money to help our clients grow and prosper. Our knowledge and ideas, combined with relationship and financial capital ensures client success.
Financial Capital: The funding we provide is critical to our clients’ success.

CIT does have CIT Bank in Utah. Can CIT utilize that vehicle to get government funding or government backstops on debt financings much like Hartford Financial, Lincoln Financial, GMAC, and GE Capital? As of now, CIT has not received a “get out of jail free” card.  As Bloomberg reports, FDIC Said to Withhold CIT Debt Guarantees Due to Risk.

If CIT were to fail, there would be a significant ripple effect across our economy. There is no sugarcoating that reality. The fact of the matter is, these are not new developments for CIT. Their predicament is simply a function of the timing of the maturities of their debt. They have plenty of company.

Where do you draw the line?

LD

  • Aaron kramer

    They will not rescue CIT because there is no union labor there and the executives did not contribute massive sums to the DNC. This will lead to a Lehman type debacle and if set off with CA’s default it could be catastrophic. CIT is not a household name but it touches everything in you life from student loans to corporate credit lines. One final point a little birdie told me the Goldman has a massive long positions in CIT CDS’.

  • Larry Doyle

    Aaron….very, very interesting. Not surprised to hear how Goldman is positioned. In fact, given their position, perhaps they will help push CIT over the edge.

    ….very, very interesting.

    • Aaron kramer

      Of course they will push it over the edge and then the talking heads on CNBC will say “oh they are soooooooooo smart!”

  • kbdabear

    FYI – Bloomberg article on the CMBA ticking bomb

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aTP9nCROB6PU

    Commercial Real Estate Is a ‘Time Bomb,’ Maloney Says

  • Larry Doyle

    kbdabear…thanks for sharing. This ticking, ticking, ticking is getting louder, louder, louder. Aside from the banks, the biggest holders of CMBS are the insurance companies.

    Both the banks and insurance companies have these holdings improperly marked and thus are sitting on billions in embedded losses.

    This is developing but not “new” news…it merely has not received the attention it deserves.






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