Reports: Gov’t Mulls CIT Rescue

As we noted Monday, CIT, a major lender that received $2.3 billion in bailout money last year, is in danger of bankruptcy. Its main hope is more federal aid, but government officials, according to Monday's reports, don't see CIT as too big to fail.

Today's papers give CIT execs more reason for optimism. The Wall Street Journal, The New York Times, Bloomberg News and The Washington Post all report that government officials are considering rescuing CIT. That's not because they've changed their minds about CIT being too big to fail. The problem is the nature of CIT's business: It lends to hundreds of thousands of small and midsize businesses that would see their credit cut off if CIT went under. Because of the current wary economic climate, other banks might not fill that breach, analysts say.

Or as one analyst put it to the Journal, CIT might be too politically damaging to fail:

"It seems like official Washington is just coming to grips with what would happen if the largest small-business lender went belly up," said Jaret Seiberg, a policy analyst at Concept Capital's Washington Research Group. "It would destroy Democratic hopes of getting unemployment under control before the mid-term election."

Other links this morning:
CIT Doesn't Get the GE Treatment (The Street)
Bank of America Said to Balk at Paying Backstop Fee (Bloomberg)
Goldman Reports Big Profit, Beating Forecasts (NYT)
Obama’s Chief Auto Adviser Steps Down (NYT)

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