Federal talks ceased with CIT, effectively denying the firm's request for Federal bailout today.
ASR reported earlier this week that CIT had been denied its request for approval for the Federal Deposit Insurance Corp. (FDIC) Temporary Liquidity Guarantee Program, and was waiting for a decision by the Federal Reserve and the Treasury Department.
The Treasury and the Fed backed the FDIC's decision and denied CIT’s request. According to published reports, the FDIC is drawing the line to discourage further bailouts, and while CIT is crucial to small businesses with unstable credit, it is not irreplaceable and other lenders could step in to fill CIT's shoes.
Analysts said that CIT needs to post close to $2 billion in the next 24 hours to avoid bankruptcy, which would be required from current debtholders. The total cost to avoid bankruptcy could be up to $6 billion for this quarter.
CIT has listed eight straight quarterly losses totaling $3.4 billion to date. Should the firm file for bankruptcy protection, the loss would affect small businesses nationwide.