Wednesday, July 22, 2009

Interesting Times At CIT

Bloomberg is running some very interesting stories on CIT.

This I promise you will get very interesting very quick.

From the looks of it PIMCO and Centerbridge have CIT over the barrel. Why would CIT say no to GE Capital and do this deal with PIMCO/Centerbridge? Is it more of a scathing indictment of GE Capital? This deal assuredly makes a CIT Group bankruptcy a definite possibility. Because either way PIMCO/Centerbridge comes out 100% whole. They have a better chance of recouping their money in bankruptcy then if CIT survives. Also after PIMCO rapes CIT of its assets, will then GE gorge on the Airplane Leasing business of CIT?

Microsoft and others have signed off on financing deals with CIT, but they weren't involved in this deal, so any CIT bankruptcy, and these guys are out of luck, as most of the collateral is pledged to back the loans from PIMCO/Centerbridge.

Its beyond shocking that a deal like this gets done, and CIT actually signed off on it.

Reuters Piece.

If and when CIT does the death spiral towards bankruptcy, even more questions will be asked of Bernanke/Geithner. It looks like the entire $2.3B the Treasury pumped into this puppy will be lost. These two guys never asked any questions about CIT and never flexed their muscles forcing them to restructure, why would they? Its not their money!

From this we want to give more power to these guys? Systemic Risk Regulation? You have got to be kidding me.

It looks like the FDIC is the only ones who know what they are doing. Why did Treasury/Fed lend money to CIT, when the FDIC didn't do so?

I think Sheila Bair (FDIC) is a bright individual, although she did steal WAMU like a thief in the night, she knew these CIT guys were in deep trouble.

This is also a primary reason why she is not liked by Treasury/Fed, because she tells it like it is. She calls a spade a spade.

Even last week the Fed stated that CIT needed another $4B to stay afloat.

Again earth to powers that be...the Fed/Treasury/Goldman Alum are not very good at identifying risk, because they are not in the mood to dismantle it when they see it, which is usually too late anyway.

1 comment:

  1. So CIT doesn't do the deal with GE because they needed the money far quicker. So they do a horrible deal with Pimco? This is great news for GE, as CIT is going into bankruptcy. GE is going to own CIT leasing biz anyway.
    Stupid move CIT.