How Many More Bailouts After CIT (CIT)

The Wall Street Journal has been carefully following the story of CIT’s (CIT) liquidity crisis. News that the firm is in trouble caused customers to draw down several hundred million in credit lines. The paper reports that the Treasury may provide loans to help CIT make it through what all parties hope is a short-term crisis.

The federal government has been effective at helping dozens of banks and insurance companies and it is lending those expertise to its support of CIT which has hundreds of thousands of small business customers.

But, where does the bailout of America’s financial firms end? Some large retailers have their own credit card operations. Some of those may face defaults so high that they will face cash crunches. Credit unions will probably face similar problems with bad loans.

The rapidly deteriorating commercial real estate market may put a number of private equity firms and banks that have provided them capital in a bind. Uncle Sam may be the only access that they have to capital.

The bailout program of all bailout programs is not over yet. It could go on for another year or more if property values continue to drop and unemployment rises. Flashing back to Lehman Bros., the government still has to face the problem of where it draws that line on which firms go under. CIT may not have gotten a dime in a better economy.

Douglas A. McIntyre