CIT group officially declares bankruptcy

Originally posted by Trayen11
NIKKEI is down pretty good so far. Wonder if CIT going under is a catalist to this drop??

Nikkei real time tracker.

Maybe it was on Friday... we knew this was coming for weeks now... today was a mere formality

Link from Bloomberg:

Link

We live in interesting times.

I'm still wondering if we will see the market up high tomorrow wih good work from the PPT's around the markets. People may get paniced over the fact of CIT going under.

I could see the PPT's working overtime to keep the markets up so people dont think this is a big deal. For me though I really think this is the begining of the Real-estate bubble collapse.

Originally posted by Trayen11
Wonder what the markets will do about this tomorrow. For me my guess it will do nothing over it, due to the fact that the markets aremanufactured these days anyway. But the fall of CIT might be the begining of the Commercial real-estate collapse.

No... I think Capmark signaled that collapse. They filed Chapter 11 October 25th/26th time frame.

Oct. 26 (Bloomberg) -- Capmark Financial Group Inc., the lender owned by companies including Goldman Sachs Group Inc. and KKR & Co., filed for bankruptcy protection after posting a second-quarter loss of about $1.6 billion.

Capmark, based in Horsham, Pennsylvania, is one of the largest U.S. commercial real estate finance companies, with more than $10 billion in originations, according to Moody’s Investors Service. The company, formerly known as GMAC Commercial Holding Corp., services more than $360 billion of debt. It has struggled as the default rate on commercial mortgages held by U.S. banks more than doubled to the highest since 1994.

www.bloomberg.com...


Meanwhile, Citigroup, who is carrying some seriously bad notes... and about 45 billion in bailout and additional Treasury infusions, has a serious equity problem.

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.

...

Of the company’s $1.2 trillion in credit commitments outstanding in the second quarter, $873 billion were credit card lines.

And the charge-off rate on those things is over 10%!

Here and here


[edit on 1-11-2009 by RoofMonkey]

The bankruptcy is prepackaged, which means the outcome has already been agreed on. Bondholders (I'm one) are accepting 70 cents on the dollar in new bonds plus about 90% ownership of the new company stock. Current common and preferred shareholders will get nothing, although preferred holders may recoup something if the company does well going forward.

They have recieved loans of 4.5 billion in the last week and since all their debt has now been pushed out 5 years, they should have no problem operating as usual. This will actually be a welcome relief to the small businesses doing business with CIT. CIT will have plenty of money to keep credit flowing and all their recievables (sold to CIT) will stay out of the jurisdiction of the court.

CIt and Citi are different companies and have no relation except a similar name.

Do not buy any CIT securities of any kind at this point. Bond sare a money maker from here, but I'm not sure what their standing would be if you buy them after bankruptcy.

reply to post by CookieMonster09


So what if those companies are debt free? That's only a handful out of how many? You know how many jobs Microsoft has outsourced to stay debt free? You know just how big of a government protected monopoly Microsoft has been since its inception? Don't get me started on how crappy Windows products are. The windows operating system is pretty much outdated obsolete junk as soon as it hits the market. Microsoft has ZERO competition...........they are a monopoly. If they had to compete trust me they wouldn't be "debt free".

Very important story because it shows that despite all the rosey outlooks we get from the so called media financial experts we are from from recovery.

I read an article the other day that said that consumer spending was down yet the previous week i read it was up. They don't even know what they are telling us anymore it is like they tell us both scenarios so they can say they told us lol.

I also saw on CNN(CIA news network) they had a mortgate specialist on say that they have implemented knew regulations or sumthing that actually makes it harder to sell your home but cheaper to buy one.

This sounds amazing to me so people who can't afford their homes anymore can't get rid of them and the people that maybe shouldn't have homes will be enabled to get one easier.

Typical we are conned on every front

reply to post by peacelove


I agree. This is the one company that should have been bailed out due to the potential impact on small businesses around the country and the economy as a whole. Hopefully they're correct that they can come out of this and continue to function, because as many have indicated, if they are not able to provide a line of credit for retailers for this Christmas season, we may well see a wave of small business bankruptcies follow in the wake of this one.

So what if those companies are debt free? That's only a handful out of how many?

You're missing the point. My point is very simple: Companies - and individuals - that are not bloated with debt have a much higher chance to succeed in this difficult economic environment.

And yes, there are companies and individuals who are completely debt-free. As I said before, this is generally rare nowadays, but there are some companies that still manage to run their businesses debt-free, and there still are individuals that manage to stay completely out of debt.

You asked for examples of debt-free companies, and I have you a handful.

Many entrepreneurs who have stayed in business for 10 years or more know the dangers of high debt levels. That's why most successful small businesses and successful entrepreneurs are very careful about taking on too much debt - and when they do, it's for a specific, practical business purpose (acquiring real estate, buying much needed equipment, etc.).

Anyone that works with small business owners in any capacity knows that the ones that succeed generally are very wise stewards of their money.

As far as your rant about Microsoft, read my comment above. You asked for examples of debt-free companies. I made no commentary on Microsoft's products, operating history, culture, etc. I also gave you 3-4 other well-known companies as simple examples of debt-free companies. Take a chill pill.

The benefit of the failure of CIT Group and their ilk, is that it will force entrepreneurs and businesses to run their businesses without relying on credit. Some will fail, and will have to shut their doors. For those that survive this crisis, they will be the better for it. Running a business debt-free is the way most businesses used to run, until our economy become so overbloated with debt and banks became ultra-aggressive in their lending practices.

Again, this is actually a good thing. Because we are cleaning out the waste in our corporate finance circles, and letting the loosey-goosey lenders die a natural death. That's a good thing.

Those banks and lenders that were overzealous in the boom years need to die off so that the well-run, conservative lenders can resume their rightful place in the marketplace.

This country needs sound, conservatively run banks and lenders. We have had way too many insane lending practices for way too long. I am actually glad that CIT failed. It will be painful, but it is a necessary step to a recovery. Giving CIT a bailout is like giving a drug addict more heroin. They need to file bankruptcy, clear out the waste, re-organize, and rebuild.



[edit on 1-11-2009 by CookieMonster09]

this is going to screw up the recovery...this is going to put alot of people out of jobs...it's not going to be pretty. small businesses will start to fold and it could turn into an avalanche

online.wsj.com...

reply to post by projectvxn



They are allowing it, because they are all, and I mean all in on it! Republican, Democrat, whatever! If they are part of the 545 DC Hardcore Cons or part of The Chosen One's Army, they are in on it!

reply to post by CookieMonster09


My question is how "natural" any of this is. Considering that this fiasco is basically a cascading systems failure which began in the housing sector, I'd say the case can be made as to how much role government intervention played in the beginning of this.

Consider the Community Reinvestment Act.

Discrimination in lending was prohibited, so what are banks to do when they must lend to a vast underprivileged minority caste? The answer was to invent the twin demons of subprime lending and credit default swaps.

Originally posted by jimmyx
this is going to screw up the recovery...this is going to put alot of people out of jobs...it's not going to be pretty. small businesses will start to fold and it could turn into an avalanche

online.wsj.com...

If they fail it won't be because of CIT. CIT will not operate any differently than they have in the past, except now they won't be squeezed for money for at least 5 years. This is goods news for CIT customers. If bondholders hadn't agreed to a prepackaged plan and they liquidated CIT instead then it would have been bad for the economy.

The government however was stupid. They will lose a few billion. If they had instead allowed CIT to become an FDIC bank then they would get paid back and shareholders wouldn't have lost ownership of the company. The goverment didn't interven after Bush left office because CIT is a Republican leaning institution.

I hope the economy collapses.


As much chaos as it would cause.

This system

MUST..GO

Originally posted by honkusbobo
reply to post by CookieMonster09

 

My question is how "natural" any of this is. Considering that this fiasco is basically a cascading systems failure which began in the housing sector, I'd say the case can be made as to how much role government intervention played in the beginning of this.

Consider the Community Reinvestment Act.

Discrimination in lending was prohibited, so what are banks to do when they must lend to a vast underprivileged minority caste? The answer was to invent the twin demons of subprime lending and credit default swaps.

Thats another lie. Banks sold almost all their housing loans. So their real losses came from something else like writing insurance that they couldn't back. Even Fannie Mae only has a 4.5% default rate. Interest on their other loans should cover this amount. This is a big deep hole that hasn't been made public yet and all these shenanigans are just being used to cover up something else.

The stock market will take a heavy blow tomorrow, and that's Good News.

It's the first step for the New World Order that's emerging within the next few months.

reply to post by sligtlyskeptical


Where have you been the last two years? People have been getting foreclosed on left and right, subdivisions are being abandoned in the construction phase, nobody's buying, and when they do, it's often from a bank that is taking a hit to their books!

reply to post by honkusbobo


As to how "natural" all of this is, I cannot speak to that. I will say this, I believe it is obvious that this is starting to spiral out of control. We are up to what 110 banks forclosed this year alone in just the states? I wonder what the entire global number is at. (weirdly enough I did a search and saw no bank closing in Canada.)

But I think it is obvious that we may be reaching a breaking point here. If this is truely the start of the commercial real-estate bubble collapse I think we will see a major and defining crash in the states. The crash will most likely filter into Canada very fast. I know people here in Canada like to say that won't happen as Canada seems to have survive this recession pretty well, and so far that seems to be correct when you compare both countries side by side. But when you take into account a full collapse of USA's commercial sector then Canada is in big trouble as well.

Consider this 80% of our exports go directly south. Take into account no commercial commerce of significant measure happening in the States and it's not a big reach to realise we will have nowhere to put our exports. Que Canada's crash, of course it's not just Canada that will suffer think of UK, China, Germany, France, basically any big trader with the States.

Not to mention the millions in the States that are going to be effected first. You know truth be told I was almost excited thinking im going to graduate college in a few years and all my profs preaching that this is the perfect time to graduate as things will be swinging upward majorly at that time. I will admit I was actually falling for it. But the news today coupled with the possible ramifications of this, you can say I'm nervous now.

Originally posted by honkusbobo
reply to post by sligtlyskeptical

 

Where have you been the last two years? People have been getting foreclosed on left and right, subdivisions are being abandoned in the construction phase, nobody's buying, and when they do, it's often from a bank that is taking a hit to their books!

True, but the banks don't own the loans. They were packaged up and sold to individual and institutional investors. Even today, virually every new home loan and refinance is being sold to Fannie and Freddie who then sells it to other investors. In this case, the Federal reserve, because there is no one else left willing to buy them. The point is the banks only retained a small percentage of mortgage loans made over the last decade. I don't think there is any way they lost this much money just on mortgages they held.

reply to post by CookieMonster09


i would like to point out with no links or facts to back up what i am saying
that some banks acually own the fed reserve in your country and they are the ones who will emerge with all that is left and
TAX money was paid by the fed to banks that acually own the fed (hard to get your head around i know)
and as the banks that are to big to fail own the fed they get your TAX money the scam is the the banks that own the fed got money to buy out the banks that dont own the fed and americans are on the hook for it
funney that these banks and the fed both have record profit from these transactions and the tax payer has record debt

cit proberly refused to be bought by fed/to big to fail banks
and is being burned at the stake like leiman bros

ps american fed loaned large sums of money to overseas banks to buy fed issuied bonds then after they were sold issuied fiat money against them and bought back the bonds GDP 2.5% was an accounting fraud
good luck world