A tale of two companies

CIT Group, a primary lender for small and midsize businesses, faces bankruptcy because it can’t get government loan guarantees:

[CIT] received a $2.3 billion infusion from the federal Troubled Asset Relief Program in December, after winning approval to become a bank holding company.  But CIT has so far been unable to access another federal program, one that helps banks and thrifts sell debt with government guarantees...

One problem with getting more federal aid is that the government has made it clear it doesn’t see the company as a systematic risk to the financial system...

While CIT has so far missed out on winning the FDIC’s aid, competitors like GE Capital and GMAC have been able to sell debt with the backing of the government’s top credit rating. - “Major Lender Faces Crunch • CIT Hires Bankruptcy Adviser as Payment Looms; Financier to 1 Million Businesses” by Jeffrey McCracken and Serena Ng, The Wall Street Journal, July 11, 2009, page A1 [not found online]

And small businesses are already feeling the effects...

For much of the past decade, CIT was one of the country’s top lenders to enterpreneurs and small businesses, many of which were shunned by traditional banks.  CIT was the country’s top lender to small businesses under a Small Business Administration program, making $770 million in loans last year.  But since the credit crunch... CIT’s small-business lending unit made just $59 million in loans between October 2008 and May 2009.
...
David Marcantonio, who runs... a commercial- and business-loan broker... said CIT often was more willing to work with small businesses... “We would do 20 CIT loans for every one GE [GE Capital] loan, and they [CIT] are still much more active than GE ever was... If they go away, banks are not going to be able to fill that gap...” - “Business Owners Ache as CIT Scales Back” by Serena Ng, The Wall Street Journal, July 13, 2009, Page C4 [article preview here]

Meanwhile, Goldman Sachs, Wall Street’s quintessential “insider” firm, is expected to report record profits tomorrow, nine months after it got $12.9 billion in bailout money.

So, as usual, Wall Street gets taken care of while Main Street gets screwed.


(Goldman story/links via R.S. McCain.)

Posted by: Old Grouch in In Passing at 16:04:41 GMT | No Comments | Add Comment
Post contains 372 words, total size 4 kb.