This collapse, overshadowed in size only by Lehman Brothers, Washington Mutual, Worldcom and General motors, will cost the US tax payer in the region of $2.3 bn. Last year the US financial regulators had deemed the company, which is the US leader in lending to small businesses, as fit to survive. Since then it has been refused further access to TARP cash on the basis that it was not too big to fail.CIT has managed to broker enough deals with investors to raise enough funding to hopefully keep the core business going into the future. It has filed for Chapter 11 bankruptcy, which allows it to continue operations and reorganisation as a debtor in possession under court oversight. This will allow continued payments to current bindhilders.
This could further devastate small US businesses who are already in a credit drought. But the CEO, Jeffrey Peek, has said that clients will still have access to credit. But the US taxpayer might find that it has lost its $2.3 bn 'investment'.
CIT funds about a million businesses in the US, so this will be of concern to many of them.