CIT group officially declares bankruptcy

Money changed hands behind the scenes. The debt collector came looking for a payment in exchange for not dropping the dollar all together. Just my 2 cents

I could imagine many people looking at this post and not realizing the ramifications and the reasons underlying this bankruptcy.

simply put, CIT has offered commercial loans to most small businesses in our country over the past several years.

so, what does this bankruptcy reveal?

it reveals that the small businesses that have taken loans via CIT is UNABLE to pay off their loans.

unable to pay off their loans... because CONSUMERS are not purchasing.
consumers... which make up 70% of our GDP, are losing their jobs and losing purchasing power.

but the government doesn't care about the small businesses and small people... they will only bail out the big boys.


haha
what is the point in boosting government spending and bailing out big corporations when the PEOPLE are slowly being stripped of what they own?

the ralley we've witnessed in u.s. stocks is nothing more than a 'dead cat bounce', a painful reconciliation is due in my opinion.

i truly believe this is the catalyst.

Originally posted by peacelove
I could imagine many people looking at this post and not realizing the ramifications and the reasons underlying this bankruptcy.

simply put, CIT has offered commercial loans to most small businesses in our country over the past several years.

so, what does this bankruptcy reveal?

it reveals that the small businesses that have taken loans via CIT is UNABLE to pay off their loans.

unable to pay off their loans... because CONSUMERS are not purchasing.
consumers... which make up 70% of our GDP, are losing their jobs and losing purchasing power.

but the government doesn't care about the small businesses and small people... they will only bail out the big boys.


haha
what is the point in boosting government spending and bailing out big corporations when the PEOPLE are slowly being stripped of what they own?

the ralley we've witnessed in u.s. stocks is nothing more than a 'dead cat bounce', a painful reconciliation is due in my opinion.

i truly believe this is the catalyst.

agreed!!!!!

small businesses, who gives a rip....farmers, the last outpost

this is corporate america......welcome to the machine.....swallowing everything .

money.......money.....god, how i hate money

Canada has one of the world's soundest banking system. Time will tell if that will remain so. Historically, Canada never went crazy with their lending policies, and has maintained a relatively conservative stance in their lending practices, unlike their American brethren.

As far as these American banks and lending institutions dying a "natural death", what I meant was that these bank failures - for anyone with the slightest understanding of lending fundamentals - was inevitable. You simply cannot lend money to unqualified applicants for any length of time before the defaults and foreclosures start to mount quickly. It's basic lending fundamentals.

If people have bad credit, sketchy work history, little if any capital reserves, minimal net worth, weak capacity to repay the loan - etc. - then it should be no surprise that the bank fails when they lend under these circumstances. That's what I mean by the idea that these banks need to die a "natural death". They dug their own graves when they engaged in these reckless lending practices.

Many, many businessmen and bankers in this country shook their head in disbelief at the reckless lending practices during the boom years. Anyone with a modicum of business sense knew that this would eventually come back to bite us, and that bank failures and bankruptcies would be the end result. It didn't take a rocket scientist to figure out that this was a disaster waiting to happen.

That's why CIT's failure is a natural death. The cause was reckless lending. The result was bankruptcy. The two go hand in hand and one naturally follows the other - always has, always will.

Originally posted by peacelove
I could imagine many people looking at this post and not realizing the ramifications and the reasons underlying this bankruptcy.

simply put, CIT has offered commercial loans to most small businesses in our country over the past several years.

so, what does this bankruptcy reveal?

it reveals that the small businesses that have taken loans via CIT is UNABLE to pay off their loans.

unable to pay off their loans... because CONSUMERS are not purchasing.
consumers... which make up 70% of our GDP, are losing their jobs and losing purchasing power.

but the government doesn't care about the small businesses and small people... they will only bail out the big boys.


haha
what is the point in boosting government spending and bailing out big corporations when the PEOPLE are slowly being stripped of what they own?

the ralley we've witnessed in u.s. stocks is nothing more than a 'dead cat bounce', a painful reconciliation is due in my opinion.

i truly believe this is the catalyst.

They couldn't raise money by traditional means any longer. Non traditional means borrowing at higher rates then they were able to lend at. This was CIT's main problem. They lost all their sources of cheap money. Some loans went bad but most of the stuff CIT does is secured by the whole business so they rarely lose money on a loan. It was really a liquidity problem which has been made to look like a solvency problem.

CIT expected to be able to refinance as loans came due as they always did before, but the market changed and the cheap funds dried up. Once they issue a new stock, many of these loan losses and asset writedowns will be reversed and the new stockholders (I get some) will do pretty well, plus get an oversized rate of interest on the new bonds they will recieve.

CIT will be fine, they remain a valuable franchise. None of their operating companies are even part of the bankruptcy. It is just a formality to chnage the equity ownership.

Originally posted by DaddyBare
reply to post by Trayen11

 

Guess that means that we tax payers are out the money the government sunk into CIT … All $2.3 billion.

Yes we are out the 2.3 billion. It was given to CIT in exchange for stock. That stock is now worthless and CIT does not have to repay a penny of it. In the list of creditors, the US will be at the bottom of the list.

Originally posted by CookieMonster09
Canada has one of the world's soundest banking system. Time will tell if that will remain so. Historically, Canada never went crazy with their lending policies, and has maintained a relatively conservative stance in their lending practices, unlike their American brethren.

You have NO idea what your talking about...

Folks need to wake up..

ctv2.theglobeandmail.com...

"Canadian consumer debt loads were already heading in a worrisome direction before the crisis. The trend is now accelerating, driven by a large increase in mortgage balances among middle-aged people.

U.S. consumers, chastened by the destruction wrought by their profligacy, have lifted their savings rates to levels above 3 per cent, up from zero ahead of the crisis.

Canadians are going in the other direction. Household debt rose 3.4 per cent in the first half of the year, as personal disposable income fell 0.2 per cent, according to Mr. Tal. The debt-to-income ratio has risen to 140 per cent from 131 per cent in the past year.

Much of the new borrowing is mortgages, which have grown even as Canada's broader economy was contracting."

or

"But the decision to take on bigger mortgages isn't the result of bigger paycheques. In 2004, mortgage credit amounted to about 74 per cent of personal disposable income. Now it's 96 per cent."


or

"But what few Canadians realize is that the housing market has avoided collapse (prices are down 32 per cent in the U.S.) because the Harper Conservatives directed the CMHC to change the mortgage rules to effectively make the Canadian government the biggest sub-prime lender in the world. What's almost as alarming as this reckless policy is that no one in the financial media is talking about it, even though everyone knows the facts."

thetyee.ca...


but hey.. you know everything, right?

Just so you got it: "Conservatives directed the CMHC to change the mortgage rules to effectively make the Canadian government the biggest sub-prime lender in the world."





[edit on 1-11-2009 by pynner]

What no one has stated here yet is the fear and possible panic this will cause, and the knee-jerk reactions to follow. Regardless of how the world markets have behaved in the past, we are in uncharted territory and have been for some time now. Once enough of these banks/lenders fail, it won't matter if some businesses still have cash, because the value of the dollar will fall so low that normal operation becomes impossible. Enough people will be unemployed that desperation will set it, and chaos will ensue.

This is not the same society that almost fell 80 years ago. People do not care about banding together and helping each other- only themselves. This event is a trigger for another bad drop. Just how far it goes down depends on how much fear is manifest from it. Many will believe it is a repeat of a year ago, and flee like animals from a forest fire. As more become unemployed, and inflation inevitably begins, the slow burn will eventually become a raging inferno, and many with nothing to lose will finally crack under the strain.

This is yet just another step toward the cliff we've been approaching for a decade now. But now we can see the edge....and the abyss isn't too far ahead.

but hey.. you know everything, right?

Pynner - Check your facts. Apparently, you can't read a word of what I wrote.

First, the Canadians have nothing on the greedy recklessness of the American bankers. Not even close.

It comes as no surprise that the government of Canada has intervened in the mini-mortgage crisis in Canada. That's to be expected.

And it comes as no surprise that more Canadians are increasing their debt load. That comes as hardly a surprise given the economic woes. But Canadian consumers are not bankers, now are they? They may be depositors - true enough - but they don't run the banks. Bankers do.

A little uptick in debt for the Canadian consumer? Ha. What a joke. You wouldn't believe the debt the Americans carry - credit cards, student loans, car loans, mortgages, home equity lines of credit, more credit cards, more credit cards, retail credit cards, etc. etc. We borrow more money to pay for what we borrowed.

Americans increased their savings rate? Yeah. I really believe that one. Many Americans are getting laid off, losing their homes, and you actually believe that they are saving more money? Where have you been? Have you even looked at our unemployment numbers lately? Huh? If anyone is saving more, it's the 2 pennies in their piggy bank that they saved when they were a kid. Most Americans are in debt up to their eyeballs.

(Funny how you forgot that I said the word, "Historically". I am not talking future events. Learn to read. I also said that only time will tell.)

Banking in Canada is widely considered to be the most efficient and safest banking system in the world. This according to a 2008 World Economic Forum Report which surveyed 12,000 corporate executives. (But then again, you know everything, right? More than 12,000 corporate executives who must be smoking bananas, right?)

So consider Canada the best of the worst if you deem fit. I would rather put my money in a Canadian bank than an American bank given the rate of bank failures we are seeing these days. We have over a 100 bank failures here.

At least Canadian bankers have a history of being a little more intelligent with their lending criteria than our American bankers.

Following al the discussion on CIT, I just wonder how many banks there are, that are in great shape. Surely, this has to be a rarity, and these few that are healthy should be screaming to the masses that they are doing ok, and haven't made risky ventures into questionable lending practices.

perhaps the other banks don't want to be exposed as being less than in ideal shape. My credit union ranks a 2, on a 1-5 scale. not that great. logic seems to dictate that sooner or later, one of these larger banks will surely be the tipping point to chaos. We all know it's going to happen, and it seems to be happening soon.

Will all the webbot predictions come to pass, only a few days off being spot on??? Someone, or somegroup is going to be right sooner or later, it might be now....

How many banks in "great" shape? Few. Probably less than 5-10%. TheStreet.com has a nice little bank rating tool on its web site. Ranks banks A, B, C, D, etc. Very few have A ratings.

Will a big bank fail? I don't think it's a matter of "if", so much as a matter of "when". Not be a doomsayer, but if one of the big banks fail, it will precipitate even more chaos in the economy. At that point, I could see a federal takeover of most, if not all, of our banks in this country. Not an unlikely scenario at the current pace of bank failures.

Most of what you guys are saying about the Canadian banking system is COMPLETELY FALSE! The only reason the Canadians have weathered this storm better than anyone else is because they are a population of 33+ million not ~300+ million like the USA. Their banking system is no more sound than ours.......their money system is a debt based one just like ours only on a much smaller scale. Plus much of Canada is invested in the US financial system anyways.

[edit on 1-11-2009 by Zosynspiracy]

Wow what a nice, neat bankruptcy filing.. never seen one so clean

CIT will still loan to all small businesses.
Employees still get paid
Lenders still get paid
Bond holders don't get touched
Every one seems happy except...

Stock holders. Don't worry, the big guys got out when the stock was $50+ in 07 ... the only idiots foolish enough to be in CIT stock today is 1. Pension funds 2. Mutual funds 3. Government (who bought a few billion in preferred stock.. ha...ha...ha.)

As of Nov 2 all stock is erased. Nothing. Zilch.

I actually don't see this hurting the markets..

reply to post by Trayen11


R got it again! He posted this pic on his site Oct. 31:

[atsimg]http://files.abovetopsecret.com/images/member/7e866beeba93.jpg[/atsimg]

This hurts if CIT is cutting lines of credit and/or not loaning out enough money for businesses to survive. I think the govt. didn't save them because they are clearly not a bank and don't have any part of them acting as one, they are an intermediary.

You asked how the Markets would react to the news...
Well its still a few hours before the NYSE opens but so far it's up

Dow futures were up 58 points, or 0.6 percent, at 9,722 while the broader Standard & Poor's 500 futures rose 6.6 points, or 0.6 percent, to 1,039.60

As I said in an earlier post this news wasn't unexpected... it's been weeks in the making yesterday was simply a formality... investors have pretty much fled CIT already... now their focus is on earnings reports.... what could shake the market next if the monthly jobs report due out this Friday... they predict a loss of only some 178,000 jobs(+- a few hundred), if that number is higher???? well only time will tell but today at least everyone seems bullish...

Current Market standing

[edit on 2-11-2009 by DaddyBare]

reply to post by pynner


Pynner, you are absolutly right about the federal gov. being now the biggest mortgage lender.

Where this astounding deficit this year went from ?

Flaherty bought up via Housing and mortage corporation and by the federal government 125 billions in mortage loans.

During the last federal election, it went almost unotice by mainstream medias, on purpose I guess. 75 out the 125 Billions was used to buy dubiuous mortages from banks.

It maintained a high level in house pricing, so it kept equity for consummers to keep on spending. But how much did we (as citizens) lost in these trades ?

125 Billions for Canada is quite 1 250 billions for the USA. If Canadian banking system is the soundest on earth ! well, how is it around the globe ? Freaking...... But canadian stimulus package is amazingly quiet and secret.

reply to post by eldard


It was not really a stretch for him to do that as it was all over the news on the 30th....hell even before that. I even posted a thread here on the 29th saying they were going to declare.

This actually is not big news as most new it was coming anyways, R did not call this he just did what I did. Saw it on the news and posted it to his website.

Link to my other post about this

www.abovetopsecret.com...

[edit on 11/2/0909 by Trayen11]

~SOMEBODY~ is holding the stock. And they are screwed.

I hope the market drops like a really heavy thing.

I hope Obama gets blamed for it all.

Those two things would make my day.

reply to post by Cabaret Voltaire


Not to burst your bubble there, but I seriously doubt the market will go down today. As I said at the begining of this thread, odds are the market will end up. People are going to spin this saying because this has been seen coming, the markets have already adjusted to it.

And dont you worry, the PPT will be out in full force to prop that baby up should it start to drop. got to keep the illusion that all is well, to keep those suckers in the market. Or draw some new ones in.