Monday, November 02, 2009

Hey Taxpayers, you just lost $2.33 Billion, Congrats


CIT filed for bankruptcy protection on Sunday, and part of its plan to heal itself is wiping out the taxpayers’ $2.33 billion stake in the company.

CIT, which specializes in lending to small and midsize businesses, got bailout money last December, a vote of confidence from regulators and the Treasury that CIT could survive and use the money to boost lending. But by the summer, the company was flirting with bankruptcy.

The Treasury’s investment was made in the form of preferred shares, as it was in almost all of the 600 other banks it approved for taxpayer investment through its TARP program for “healthy” banks. Preferred and common shareholders will be wiped out, the company has said.

The Treasury does stand a chance to recoup something. But that recovery “will be minimal” said a Treasury spokesperson.