CIT, the 100 year old and 5th largest bank in the U.S. filed for Chapter 11 bankruptcy Nov. 1, blaming losses on subprime mortgages and decreasing credit markets. CIT listed $71 billion in assets and $64.9 billion in liabilities.
CIT funds approximately 1 million businesses such as Dunkin’ Brands Inc. didn’t include CIT Bank in bankruptcy filing. The CIT bankruptcy is the one of largest bankruptcies in the U.S.
The government has input billions of dollars into CIT including giving $2.3 billion last fall. Citigroup received $45 billion in loans from the government, which now owns a 34% interest in the bank. Citigroup plans to sell some of its assets including its interest in Smith Barney.
CIT customers should be nervous because as a customer you don't know what the future holds for CIT. The company assures its customers that it will be business as usual and that customers should not take their business elsewhere because of the bankruptcy. Unfortunately, if most of their customers leave CIT will not be able to survive.
CIT 2,000 vendors that supply merchandise to 300,000 stores. According to analysts approximately 60% of the apparel industry depends on CIT for financing so the bankruptcy will cause a domino effect for businesses and customers who shop at their stores.
As my grandmother used to say "never have all your eggs in one basket". If you have all of your money in CIT I recommend moving at least some of it to a more stable bank like PNC, BB&T or a credit union.
No one knows the future of CIT but my guess is it will collapse like the other companies such as Lehman Brother and Washington Mutual.
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