Giant Lender CIT Goes Bankrupt And 9 Banks Go Under

Ghosts were not only cruising sidewalks looking for candy this weekend, they had also infested some banking balance sheets.

All-Hallow’s is when the spirits come out, and come out they did; In the largest banking failure since WaMu, massive commercial lender CIT filed for bankruptcy. 9 US banks were also seized on Friday, bringing the number of banks that failed in 2009 to 115.

I know, I know, but you just need to be patient America. Exorcism is a process.

Nine U.S. banks seized in largest one-day haul [Reuters]
CIT Group Files Bankruptcy, Seeks to Reduce Debt [Bloomberg]
(Photo: peasap)

Comments

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  1. utensil42 says:

    So CIT has filed bankruptcy and nine banks have been seized. Any idea which nine banks those were?

    • usa_gatekeeper says:

      @utensil42: California National Bank, Bank USA, NA, in Phoenix; San Diego National Bank; Pacific National Bank in San Francisco; Park National Bank in Chicago; Community Bank of Lemont in Illinois; North Houston Bank, Madisonville State Bank, and Citizens National Bank in Teague, all in Texas.

      Source: “Federal regulators close 9 banks”
      AP – Friday, October 30, 2009 6:16:05 PM TIM PARADIS and MARCY GORDON

  2. Unsolicited Advice says:

    CIT’s bankruptcy is procedural, their survival was a pre-requisite for entering the process. That said, it’s going to be pretty hilarious when the dollar consequences come home to roost and all the debt-free savers realize they’ve been sold upriver. Thank god the FDIC protected all that worthless “wealth” from disappearing! Shroedinger’s economy proceeds apace.

  3. lifestar says:

    I don’t think the CIT bankruptcy is simple as it seems. It sounds like they filed for a special kind of bankruptcy which allows them to zero out all of their common and preferred stock, but keep all the bailed out money they had received from the government. They’re not really dead, but they no longer owe anything to the US now.

  4. hunter3742 says:

    Is there a list of those banks?

  5. Muthafodder says:

    Not to be confused with Citigroup, another large financial services company.

    I do hope those who read this know the difference!!

  6. Mr.Duke says:

    Bankruptcy is not all bad. It allows companies to reorganize their debts and business. Whereas bailout money just throws good taxpayer money at horrible companies, allowing them to continue as zombies.

  7. H3ion says:

    This is a prepackaged bankruptcy (In and Out Bankruptcy)where substantially all the creditors have agreed in advance with CIT and which won’t even cause a hiccup in CIT’s operations. Of course those who hold CIT equity might not be that happy but this is one of those businesses which is so important to small and medium sized business that the government just couldn’t let them go down.

  8. Esquire99 says:

    @usa_gatekeeper:
    That’s true, but I think that was a reasonable risk when the govt. loaned them the money. They took the same risk with Goldman, JPMorgan, BofA, etc. when they loaned them money. Some of those loans have been paid back, in full w/ interest, some are still outstanding and generating periodic payments (special dividends, etc.) and some will default and become uncollectable. It’s just like a bank, some loans will never be repaid.

  9. Omir The Storyteller says:

    @mac-phisto: I have a Newegg card I got a few years ago. My statements were processed through Chase, but I don’t know if CIT was backing Chase up.

  10. rickhamilton620 says:

    @mac-phisto: Dell card definetly, I think Fingerhut’s was/is too.

  11. mac-phisto says:

    @Esquire99: seems like it was an even bigger risk considering CIT became a BHC last december so they could receive bailout money later that month. i’d like a chance to punch someone in the face for authorizing the release of those funds.

    i would also like to see some bankruptcy reform come out of these recent failures. nice that BAPCPA failed to address these abuses almost completely. even secured creditors are getting shafted these days, which amounts to a company literally being stolen out from under the shareholders that own it.

  12. Esquire99 says:

    @mac-phisto:
    I don’t mind the shareholders getting screwed; that’s a risk they take by investing in equity. I do have issues with secured creditors and bondholders getting screwed, though.

  13. Schmeeky says:

    @vladthepaler:

    It’s CIT, not CITI. CIT lends money to businesses and the whatnot.

    This doesn’t involve Citibank at all.