Thursday, July 16, 2009

The Situation at CIT is Looking Bad

The Times reports this morning (here) that the federal government is unlikely to intervene to save CIT.

This story has been reported this week as a possible harbinger of where the Administration will draw the line as to which businesses are "too big to fail." CIT specializes in lending to small businesses, so there was some speculation that the Administration would be reluctant to let it fail (since that could negatively impact the ability of small businesses to obtain financing).

However, according to the story this morning, the Administration is backing away from any further investment in CIT, and a private firm purchase (which would require approximately $6 billion in capital) is also unlikely.
Meanwhile, the stock market has been solidly up for the past several days, after positive earnings reports from Goldman and Intel.

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