Why CIT Group Will Need To Declare Bankruptcy

There are thousands of US small and mid-size companies that rely on lines of credit from CIT Group (CIT), a well managed financial services company that apparently will need to declare bankruptcy because it may not be able to meet about $2.7 billion in liabilities coming due in the second half of the year.

Why is this happening? Ask Treasury Secretary (and ex-NY Fed President) Tim Geithner, current NY Fed President (and ex-Goldman Sachs (GS) chief economist) William Dudley and JP Morgan’s (JPM) CEO Jamie Dimon, the man who basically controls the NY Fed. These are the people who know why CIT is cut off from essential backing from the US Treasury and the Fed, whereas AIG (AIG) received almost $200 billion in federal aid.

http://tinyurl.com/mjcbd4
http://www.bloomberg.com/apps/news?pid=20601103&sid=aINWOYTgy2zk
http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program

The answer of course is that Goldman Sachs was the biggest counterparty to AIG debt and JP Morgan was another. AIG was merely a conduit of money from the US taxpayer to these banks. In the dealings of these banks with anybody, it’s a matter of they win, you lose.

Here is the CIT corporate profile:

http://finance.yahoo.com/q/pr?s=CIT

Did you know that CIT Group’s Corporate Governance Quotient (CGQ®) (as of 1-Jul-09) is better than 93.9% of S&P 500 companies and 99.4% of Diversified Financials companies?

http://help.yahoo.com/l/us/yahoo/finance/news_and_opinion/fitacgq.html

Did you know that JPMorgan Chase’s Corporate Governance Quotient (CGQ®) is better than 84.7% of S&P 500 companies and 97.6% of Diversified Financials companies?

Did you know that Goldman Sachs’s Corporate Governance Quotient (CGQ®) is better than 45.4% of S&P 500 companies and 87.8% of Diversified Financials companies.

Wow; a 93.9% rating vs 84.7% and 45.4%!

But, it’s no longer about doing the right thing, is it? It’s all about not losing money, and in fact making it, regardless of the strategies and tactics employed.

I’m wondering today how much profit GS and JPM traders have made shorting CIT stock?

Here are the Monthly-Weekly- and Daily charts:
http://billcara2.com/tkchart/tkchart.asp?stkname=CIT&ind=rsi&wt=3
http://billcara2.com/tkchart/tkchart.asp?stkname=CIT&ind=rsi&wt=1
http://billcara2.com/tkchart/tkchart.asp?stkname=CIT&ind=rsi&wt=0

With President Obama surrounding himself with alligators, I don’t see how he expects to clean up the swamp.

Now and then we all have to get out. This week is mine. Have a good one. Geoff, Patrick, korvus and Matt will keep the show on the road in my absence.

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Comment by RON

2009-07-13 13:57:05

Could not agree with you more about GS and JPM. They really
are the ones that caused this bubble to burst. As for CIT,
I hope no bankruptcy occurs. As you can see, alot of media
support for them now relating to small business. I only hope
reasonable minds prevail. Good info. Thanks

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