Commercial banking giant CIT files for Chapter 11 bankruptcy protection~!!!!

[freeyourmind]

Well in any case, +1 for the LATOC rumor mill. Yes its a huge bankruptcy, but its still small napkins compared to the hulking mass of bad debt that was Lehman Brothers. But yes, this could  still be the start of some renewed bad mojo.

[cozdiver]

I wonder what this means for monday...and onwards?

One word: DERIVATIVES

[HamsterFist]

Another Story Link:

http://www.huffingtonpost.com/2009/11/01/cit-bankruptcy-filed-us-w_n_341567.html

[cozdiver]

FWIW from the Market Ticker:

The practical impact of this is likely to be:

    *
      Their factoring business is unlikely to be significantly impacted.  This is a very profitable line of work, and while I have often (and still do) argue that any business using it is certifiably insane, it should continue.

    *
      Their "general" lending, however, is almost certain to be severely curtailed.  I have seen estimates that it could fall by as much as 90%, and that seems reasonable to me.

For many small businesses the latter could be particularly acute.  I would also expect the margins on their factoring business to be adjusted (better for them, worse for retailers) which could put a further squeeze on their small and mid-sized business clientele.

This will leave a mark - we'll have to see how bad it gets for retailers in the coming weeks and months, but being right in front of the holidays it cannot be a welcome development.

[alaskat]

Absolutely correct  DERIVITIVES, depends on who owed what to who, this could be big!!!  I am sure G.S will come out smelling like a rose, that company is unbelievably crooked.

[Roberto Thorn]

and so it begins............

[wordnerd]

I think it is more like - another step down the ladder

[beast2000]

I wonder what this means for monday...and onwards?

One word: DERIVATIVES

classic picture!

oh shit, the webbots seem to be right on.

[Big Scotsman]

So the question remains, why would Obama allow a company of this significance (basically the commercial lending source for middle America) go bankrupt?

Any takers?  

[Annihilatrix]

Goldman, again... Good article, concise description.

http://blogs.reuters.com/rolfe-winkler/2009/10/06/why-privilege-derivatives/

Why privilege derivatives?
Rolfe Winkler
>>>>>
....
Because Goldman’s loan to CIT was structured as a derivative — specifically, a “total return swap” — Goldman’s claim won’t be stayed along with others’ if CIT files for Chapter 11. The filing would trigger a $1 billion payment to Goldman.
...
First off, according to a paper by Robert Bliss and George Kaufman, it’s possible that the protections afforded derivatives actually increase systemic risk.

But for the sake of argument, let’s assume they’re necessary. Then we have another case of the tail wagging the dog, of reorganizing our financial markets around the needs of derivatives traders.

For what? The increased “liquidity” that derivative traders are so fond of reminding us they provide? CIT might not have been able to secure extra financing a year ago had Goldman not been able to structure its deal as a derivative. But maybe that would have been a good thing. If a company can’t secure financing via conventional lending sources, that’s probably a great sign the balance sheet needs to be restructured.
<<<<<<<<<<<<<<<<

[Grower]

I'm leaning toward the "'nuther rung" crowd. GM and Chrysler went bankrupt. It hurt little guys, not big guys. I would expect this to have the same effect. It could be a domino, I guess, but nothing seems strong enough to really push it all over.

[Big Scotsman]

I'm leaning toward the "'nuther rung" crowd. GM and Chrysler went bankrupt. It hurt little guys, not big guys. I would expect this to have the same effect. It could be a domino, I guess, but nothing seems strong enough to really push it all over.

The U.S. economy is being dismantled from the inside out. 

What happens to a building when all the structural supports have been removed?

[PeakARoo]

Link to WSJ's Market Watch story on CIT collapse.


http://www.marketwatch.com/story/citto-file-for-bankruptcy-after-rescues-fail-2009-11-01

[freeyourmind]

What does it say that the main page of MSNBC.com has the CIT story in moderate print nudged to the corner and a huge picture of Brett Farve playing with his toys as the centerpiece?

[mtlouie]

So the question remains, why would Obama allow a company of this significance (basically the commercial lending source for middle America) go bankrupt?

Any takers?  

That's why.