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)
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i think i had/have a card thru them. anyone know who the companies they dole out credit lines thru? i'm think the dell card was a CIT & i think newegg's is thru them.
no more sunday commercials for you cit..... buh bye
So CIT has filed bankruptcy and nine banks have been seized. Any idea which nine banks those were?
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.
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.
@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
Is there a list of those banks?
@Esquire99: You, I and all other taxpayers just saw $2.33 billion of our hard earned money disappear with the stroke of a pen in bankruptcy court. And no one seems too upset.
@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.
@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.
@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.
FDIC: Bank Failures in Brief - List of all failures
U.S. Bank, NA, of Minneapolis, Minnesota, Assumes All of the Deposits of Nine Failed Banks in Arizona, California, Illinois and Texas - press release for the banks that failed Friday.
So what happens to money that people had in Citibank or in any of the seized banks? Is it just gone? Do you have to file something in court to have a hope of collecting a few pennies per dollar, etc.?
@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.
It's CIT, not CITI. CIT lends money to businesses and the whatnot.
This doesn't involve Citibank at all.
Not to be confused with Citigroup, another large financial services company.
I do hope those who read this know the difference!!
@vladthepaler: According to the FDIC, "U.S. Bank National Association, Minneapolis, MN has agreed to assume all deposits" for the nine failed banks. This means most people are fine and don't have to do anything as far as their insured accounts go. If they had over $250,000 in deposits or had products with those banks that aren't FDIC insured then they might not get that money back.
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.
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.
CIT's bankruptcy has been a long time coming. It hired Ch. 11 counsel in June or July and has been hanging on by a thread since then, trying to either work out something with its bondholders or work out a pre-packaged bankruptcy. This weekend, they went with the latter. They now have access to a $1bil loan from Carl Ichan and a $2.2bil line of credit from Goldman Sachs to try and get out of BK.