Talks with federal officials end with "no appreciable likelihood" of help "over the near term," the company says
By the Associated Press
The Obama Administration drew a line in the sand on financial bailouts on Wednesday, July 15, denying emergency aid to CIT Group (CIT), a struggling commercial lender on the brink of bankruptcy.
After days of round-the-clock talks with regulators about a possible government bailout, CIT late Wednesday said those negotiations had ceased. The company said its management and directors were "evaluating alternatives."
When asked about CIT, a Treasury Dept. spokeswoman said in an e-mailed statement that "even during periods of financial stress, we believe that there is a very high threshold for exceptional government assistance to individual companies."
With its assets deteriorating and dangerously little cash on hand, the news left CIT with few options outside of bankruptcy. A filing could come as early as Wednesday night, analysts said.
CIT is one of the nation's largest lenders to small and midsize businesses. The company has warned that its failure could imperil about a million corporate borrowers, including retailers, restaurants, and airlines.
The New York-based company was negotiating with officials from the Treasury, Federal Reserve and Federal Deposit Insurance Corp. for much of the week. An agreement on aid appeared close at midday Wednesday. But trading of CIT's shares was halted Wednesday afternoon.
The company had deteriorated so far that officials feared even a short-term loan from Treasury's financial bailout might not save it, according to industry and government officials who spoke on the condition of anonymity because they were not authorized to discuss the matter.
"I think it makes a bankruptcy filing a near certainty," said longtime banking analyst Bert Ely. "It's quite possible they could file before trading on Thursday."
CIT already received $2.3 billion from the $700 billion financial system bailout.
A spokesman for the Fed declined to comment. A spokesman for the FDIC could not be reached for comment Wednesday evening.