Update: David Faber is reporting that CIT Group will file for Chapter 11 bankruptcy on Friday.
This is outstanding news. I am pleased and I must admit surprised. I wrote just this afternoon all the reasons why the correct decision is to let them fail. Kudos to President Obama for not listening to Treasury and Timmaaay.
Here's what we know: Geithner supported the bailout; Sheila Bair opposed it; no idea if Summers played a role; Obama went with Bair's opinion that CIT Group was unsavable. With $10 billion in new debt needed by the end of 2010 and their portfolio of bowling alleys and strip malls, the fear was it would be another wasted cash infusion. We have already extended CIT $2.3 billion in TARP funds in a precious brainless decision. They should have been denied that time. Paulson and Kashkari, not so smart.
In a brief statement, CIT said, "There is no appreciable likelihood of additional government support being provided over the near term. The Company’s Board of Directors and management, in consultation with its advisors, are evaluating alternatives."
From the Washington Post:
CIT Group, an important lender to smaller companies, said last night that it had failed to persuade the federal government to provide further financial assistance to help it avert a likely bankruptcy filing that could hurt thousands of clients ranging from small clothing manufacturers to retailers such as Dunkin' Donuts and Dell.
The decision, which appears to mark the first time that the Obama administration has denied aid to a large, troubled financial company, reflects the judgment of senior officials that the economy is now strong enough to absorb a painful failure, in part because New York-based CIT is not among the very largest financial firms.
The consequences of a bankruptcy filing still could be severe. CIT provides financing to roughly 1 million companies, many of them already struggling to weather the recession. CIT estimated in its pleas for assistance that thousands of firms might be unable to survive its demise.