Taxpayers Lose $2.3 Billion with CIT Bankruptcy

The TARP recipient bites the dust—and wipes out billions of taxpayer dollars in the process.

| Mon Nov. 2, 2009 4:55 PM EST

This story first appeared on the ProPublica website.

CIT filed for bankruptcy protection on Sunday, and part of its plan to heal itself is wiping out the taxpayers’ $2.33 billion stake in the company. 

CIT, which specializes in lending to small and midsize businesses, got bailout money last December, a vote of confidence from regulators and the Treasury that CIT could survive and use the money to boost lending. But by the summer, the company was flirting with bankruptcy.

The Treasury’s investment was made in the form of preferred shares, as it was in almost all of the 600 other banks it approved for taxpayer investment through its TARP program for “healthy” banks. Preferred and common shareholders will be wiped out, the company has said.

The Treasury does stand a chance to recoup something. But that recovery “will be minimal”  said a Treasury spokesperson.

CIT is not the only foundering TARP recipient. We reported a couple of weeks ago that three others were struggling to survive.

A little later in the week, we’ll post our monthly accounting for the bailouts to give you an overview of spending, how much has come back, and how much won’t.

Get Mother Jones by Email - Free. Like what you're reading? Get the best of MoJo three times a week.