Bailout talks between the US Treasury and major business lender CIT Group have collapsed, potentially driving the company into bankruptcy.
The move late on Wednesday was the first time since the economic crisis exploded late last year that the Treasury refused to bail out a company of this size.
CIT Group, which specializes in financing for nearly a million small and medium-sized businesses, said it had been informed there would be “no appreciable likelihood of additional government support being provided over the near term.”
The commercial lender’s failure would be the sixth-largest bankruptcy in the US since 1980, after US automaker GM, which has just finalized swift bankruptcy restructuring, and energy giant Enron.
The decision to leave the company to its own devices confirms the intent of US authorities to limit bailout operations to the biggest financial firms, just as the Republican opposition blasts US President Barack Obama’s administration for expanding government control.
“Even during periods of financial stress, we believe that there is a very high threshold for exceptional government assistance to individual companies,” the Treasury said.
CIT Group said in a statement that its board of directors and management “are evaluating alternatives” in consultation with its advisers.
A US administration official said the decrease in the level of loans granted by CIT Group over the past year indicates that the firm, which has already received billions of dollars in government assistance, was not too big to fail.
But there were calls for Washington to reassess its position, with dire warnings about the impact of any CIT Group bankruptcy on small businesses.
The National Retail Federation (NRF) said bankruptcy of the major lender could have severe consequences on the retail industry and the nation’s economy.
“A failure of CIT would impact thousands of retailers and, consequently, the consumer spending that makes up two-thirds of our nation’s economy,” NRF president Tracy Mullin said. “That cannot be allowed to happen at a time when retailers are already struggling to survive the national recession.”
In a sign of the importance given to the Treasury’s decision, Obama was said to have been updated throughout the day on the status of the talks.
Trade in the firm’s stocks was halted on Wednesday, as reports of a breakdown in talks with the government emerged.
In December, CIT Group won approval to change its charter to a bank holding company and received US$2.33 billion in capital injection from the US Treasury as part of an emergency rescue package.
The company said late on Sunday that talks with the Treasury would focus on its application to participate in the Federal Deposit Insurance Corp’s Temporary Liquidity Guarantee Program, which offers low-cost funding to banking firms.
But US officials were concerned about how quickly the company’s finances were deteriorating. Saving CIT Group from bankruptcy “would mean throwing good money after bad,” an official told AFP.
CIT Group this week claimed assets of US$60 billion, mostly in loans and leasing contracts.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique