CIT – Infinite Unknown

Prof. William Black: Timothy Geithner ‘Burned Billions,’ Shafted Taxpayers on CIT Loan

November 3, 2009 by Infinite

Every bailout only increased the problems the US will have to face in the future. The bailout money just went to Wall Street and did nothing for the people.

Another one of the nation’s largest lenders has filed for bankruptcy. On the brink for months, CIT filed for Chapter 11 protection on Sunday.

The prepackaged plan allows CIT to restructure its debt while trying to keep badly needed loans flowing to thousands of mid-sized and small businesses. The plan keeps CIT’s operations alive and makes it possible for the company to exit bankruptcy by year’s end.

But here’s the bad news: While senior debt holders will only lose 30% of their investment, we, the U.S. taxpayer, will lose the entire $2.3 billion we lent the company this summer.

William Black, professor at the University of Missouri-Kansas City School of Law is dumbfounded. “We put ourselves on the hook in a completely inept way where we lose first. We lose entirely as the taxpayers.”

Black, a former top federal banking regulator, blames Treasury Secretary Timothy Geithner for negotiating such a bad deal on behalf of the American public.

His argument goes as follows:

The government was in no way obligated to lend the struggling CIT money and, in fact, initially refused to provide it bailout funds. More importantly, being the lender of last resort, the government should have guaranteed we’d be the first to get paid if CIT eventually filed Chapter 11. By failing to do so, “it’s like he [Geithner] burned billions of dollars again in government money, our money, gratuitously,” says Black.

CIT’s Bankruptcy Erases $2.33 Billion of Taxpayer Money, May Help Bondholders And Gives Goldman Sachs $285 Million ‘Windfall’

November 2, 2009 by Infinite

CIT is 5th largest bankruptcy in US history.

– CIT Bankruptcy Filing Expected in Days; $2.3 Billion Taxpayer Money to Be Wiped Out; Goldman Sachs Receives $285 Million In Termination Fees

In exchange, Goldman Sachs received $285 million in termination fees, CIT said yesterday in a filing with the U.S. Securities and Exchange Commission. Under the terms of the two companies’ original agreement, Goldman Sachs would have been due a $1 billion termination payment to close the credit line after a CIT bankruptcy.

CIT’s Bankruptcy May Help Bondholders and Erase Taxpayer Stake

Pedestrians walk outside CIT headquarters in New York on July 10, 2009. (Bloomberg)

Nov. 2 (Bloomberg) — CIT Group Inc.’s decision to seek court protection probably will keep money flowing to bondholders and 1 million customers of the 101-year-old commercial lender. Shareholders and taxpayers won’t be as fortunate.

CIT’s Chapter 11 bankruptcy may give bondholders new notes at 70 cents on the dollar plus new common stock, and Chief Executive Officer Jeffrey Peek said clients will be able to get funds. Common stock owners could be mostly wiped out, and the U.S. Treasury Department said it won’t recoup much, if any, of the $2.33 billion of taxpayer money that went into CIT, the largest firm to go bankrupt after getting a federal bailout.

CIT Bankruptcy Filing Expected in Days; $2.3 Billion Taxpayer Money to Be Wiped Out; Goldman Sachs Receives $285 Million In Termination Fees

October 31, 2009October 31, 2009 by Infinite

Update:

– CIT Approaches Bankruptcy After Striking Icahn, Goldman Accord (Bloomberg):

Oct. 31 (Bloomberg) — CIT Group Inc., the 101-year-old commercial lender seeking to avoid collapse, may file for a prepackaged bankruptcy as soon as this weekend after striking deals with billionaire Carl Icahn and Goldman Sachs Group Inc.

A prepackaged bankruptcy “is probably going to go through,” Icahn said yesterday. He will supply a $1 billion loan for “supplemental liquidity” that can be used as bankruptcy financing, the New York-based company said. CIT also said it reached an agreement with Goldman Sachs to keep a credit line open should the lender file for court protection.
…
CIT’s agreement with New York-based Goldman Sachs will reduce a $3 billion credit facility to $2.13 billion and keep the line open should CIT file for bankruptcy.

Goldman Sachs Agreement

——————

Before Goldman Sachs would have received a $1bn ‘windfall’ if CIT fails:

– Goldman Sachs to be paid $1bn if CIT fails, while US taxpayers would lose $2.3bn (Financial Times)

Goldman Sachs stands to receive a payment of $1bn – while US taxpayers would lose $2.3bn – if embattled commercial lender CIT files for Chapter 11 bankruptcy protection, people familiar with the matter said.
…
The agreement with Goldman states that if CIT defaults or goes bankrupt, it “would be required to pay a make-whole amount” that totals $1bn, the people familiar with the matter said.
…
Goldman said: “This would not be a windfall payment. The make-whole payment is simply the present value of the spread to be earned over the life of the facility.”

The US taxpayer loses $2.3 billion, Goldman Sachs gains ~~$1 billion~~ $285 million.

I told you before that the real crisis has only just begun. This is the ‘Greatest Depression.’

CIT’s Swoon Hits Taxpayers

CIT would be the fifth-largest bankruptcy filing in U.S. history

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.

People familiar with the plan said CIT, a major lender to small businesses, intends to file for bankruptcy-court protection in New York within days, perhaps as early as Sunday or Monday. Financial firms such as CIT have historically been sold off or wound down after a Chapter 11 filing, for fear that customers will draw down lending lines and cause a run on the bank. But CIT expects to have enough creditor support to complete a prepackaged reorganization by year-end, a relatively short period for a bankruptcy case of its size.

In a move smoothing its restructuring, the company said Friday that it had persuaded billionaire investor Carl Icahn to support its prepackaged bankruptcy plan. Mr. Icahn, who wanted to push CIT into liquidation, failed to persuade other bondholders to derail CIT’s restructuring plan.

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.

Rising unemployment and a failing economy in the U.S.

October 10, 2009 by Infinite

Current Numbers Dont Add Up To Recovery

This past week the BLS (Bureau of Labor Statistics) released the September unemployment statistics and they worsened as usual, as America enjoys its recovery.

U-1-Those unemployed 15 weeks or longer, as a percent of the civilian labor force was 5.4%.

U-2-Job losers and persons who completed temporary jobs, as a percent of the labor force was 6.8%.

U-3-Total unemployed, as a percentage of the civilian labor force, the official unemployment rate, 9.8%.

U-4-Discouraged workers 10.2%.

U-5-Total unemployed plus discharged workers, plus marginally attached workers 11.1%.

U-6-Total unemployed as a percent of the civilian labor force 17%.

If the birth/death ratio is removed, U-6 is in reality 21.3% total US unemployment. The estimate is that 824,000, more jobs may be extracted from the payroll count for the 12-months ended next March. Such a revision would be the biggest since 1991. The BLS is underestimating job losses deliberately and has been for a long time. That would mean September’s loss would be some 300,000 not 263,000.

Such a revision would put job losses not at 4.8 million but 5.6 million jobs.

This is how government has operated for some time and will continue to as long as we allow them too.

Goldman Sachs to be paid $1bn if CIT fails, while US taxpayers would lose $2.3bn

October 5, 2009 by Infinite

Goldman Sachs

Goldman Sachs stands to receive a payment of $1bn – while US taxpayers would lose $2.3bn – if embattled commercial lender CIT files for Chapter 11 bankruptcy protection, people familiar with the matter said.

The payment stems from the structure of a $3bn rescue finance package that Goldman extended to CIT on June 6 2008, about five months before the Treasury bought $2.3bn in CIT preferred shares to prop it up at the height of the crisis. The potential loss for taxpayers would be the biggest to crystalise so far from the government’s capital injection plan for banks.

The agreement with Goldman states that if CIT defaults or goes bankrupt, it “would be required to pay a make-whole amount” that totals $1bn, the people familiar with the matter said.

CIT on the verge of bankruptcy

July 16, 2009 by Infinite

cit
Pedestrians walk outside CIT headquarters in New York, on July 10, 2009. Photographer: Daniel Acker/Bloomberg News

July 16 (Bloomberg) — CIT Group Inc., the 101-year-old commercial lender running short of cash, said it probably won’t receive a federal bailout, fueling speculation the company is on the verge of bankruptcy.

Talks with regulators have broken off and “there is no appreciable likelihood of additional government support,” the New York-based firm said yesterday in a statement. CIT, once the biggest independent commercial lender, may seek court protection if no U.S. aid emerges, Standard & Poor’s said this week. The company said it is “evaluating alternatives.”

CIT Chief Executive Officer Jeffrey Peek failed to convince regulators that fallout from a collapse would threaten the rest of the financial system. Officials at the Treasury, Federal Reserve and Federal Deposit Insurance Corp. have resisted putting more taxpayer funds at risk, on top of the $2.33 billion granted to CIT in December, to keep the lender afloat.

“Maybe they can put together a last-minute deal and try to sell themselves,” said Adam Steer, an analyst with CreditSights Inc. “The most viable alternative once the government decides to not step in is a trip into bankruptcy.”