CIT is to get through the collapse

The US spurning of CIT Group Inc’s aid request suggests officials are betting theyve fixed the financial system enough to resist the bankruptcy of a mid-sized lender.  

The decision to forego a lifeline for CIT came 10 months after Lehman Brothers Holdings Inc. filed for bankruptcy. Lehmans collapse ushered in the depths of the credit crisis to date, and resulted in the establishment of a $700 billion bailout fund; officials yesterday indicated programs created with that money would help fill any lending gap left by CIT. 

Timothy Geithner, en route to Paris as CIT acknowledged policy makers had turned it down, he is also wagering the administration will get thorugh any political fallout. A Treasury official reported the department predicts losses in size of $2.3 billion of taxpayer funds that it had already injected into the company from the Troubled Asset Relief Program should it file for bankruptcy. 

CIT stated it was told there is no appreciable likelihood of additional government support being provided over the near term. CIT added that it was evaluating alternatives with its advisers.  

The Treasury then noticed that the government has enacted powerful mechanisms to revive credit markets. Even during periods of financial collapse experts believe that there is a very high threshold for exceptional government assistance to individual companies. 

As for an Obama administration official stated CIT didn’t obtain more government assistance because it hadnt gone to private capital sources to rebuild its balance sheet, something that several of the biggest Wall Street and regional lenders did earlier this year.