The Obama administration seems content to let the company formerly known as CitiBank fail:
CIT said late Wednesday that negotiations with regulators about a possible rescue had broken off after days of round-the-clock talks.The move marked a defining moment for the Obama administration and showed it’s drawing a line in the sand on federal rescues for troubled financial firms.
The stock market had a selloff of CIT stock yesterday, reducing the value of what’s already a penny stock by 75%. The overall market, however, was unaffected — a clear signal that the markets aren’t concerned about systemic failure if CIT goes under. Nevertheless, CIT shares are back up this morning on speculations of a rescue by debt holders.
While schadenfreude is tempting, many familiar retailers rely on CIT:
Three prominent retail trade groups sent letters to financial regulators this week warning that the failure of CIT would rip a hole in the industry supply chain. Dunkin’ Donuts said the ability of its franchisors to open new stores or expand operations could be affected. And New York bankruptcy lawyer Jerry Reisman said he received more than two dozen calls from panicked stores and apparel manufacturers, some of which said they may not have the money to pay their employees today.
More as this develops…
