Taxpayers Lose $2.3 Billion with CIT Bankruptcy

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

Photo used under a Creative Commons license by flickr user <a href="http://www.flickr.com/photos/16961193@N06/">Ernst Moeksis</a>

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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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This is no time to come up short. It's time to fight like hell, as our namesake would tell us to do, for a democracy where minority rule cannot impose an extreme agenda, where facts matter, and where accountability has a chance at the polls and in the press. If you value our reporting and you can right now, please help us dig out of the $100,000 hole we're starting our new budgeting cycle in with an always-needed and always-appreciated donation today.

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