Taxpayers Lose $2.3 Billion with CIT Bankruptcy

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

—By Paul Kiel
—Photo used under a Creative Commons license by flickr user Ernst Moeksis
Mon November 2, 2009 12:55 PM PST

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.


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Government Sachs strikes

Government Sachs strikes again. Why did not Timmy structure our deal like GS did theirs? Isn't he supposed to be a bright GS-man? Head of The Federal Reserve of New York? Come on. Timmy knows how to write a good deal. He just "forgot" to write a good deal when it came to the taxpayers. Seems he has been doing that too many times for coincidence. Inside job. $2.3 billion dollars of government subsidies of which $1 billion just might be used to pay GS. Money is fungible.

As two important Congress members have stated, "The banks own Congress." And The Treasury. And The Fed. And Presidents since (at least) Reagan. Though, I would opine, since Nixon.

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The CIT filing represents

The CIT filing represents the largest loss yet for TARP and offers a showcase on the risks to U.S. taxpayers. While the U.S. Treasury will likely lose the $2.3 billion, Goldman Sachs – an investment banking firm that also offered CIT a rescue line – was able to structure a loan to CIT that had numerous payback triggers and penalties, unlike the lost TARP CIT loan.

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CIT & Taxpayer money!!!!!!

Can someone explain to me why the arsonists that set this fire are the ones that we're relying on to put out this blaze??!?!?!?!

And these BOZO's feel they DESERVE ANOTHER BONUS, because????

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TLGP

It is important to remember that CIT is the only recepient of TARP money that did not get any help from TLGP.

It was the FDIC stating that CIT would not get help that forced the crisis in July. Every company larger than CIT received FDIC help and many smaller than CIT received FDIC help.

Would the government have lost money if the FDIC provided the expected help?

Should the FDIC have provided help to those other companies?

I wish I knew the answer. I wonder if anybody does

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