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by The Investment U Research Team
Even as Goldman Sachs (NYSE: GS) reported the best quarterly profit in it’s 140-year history, and JPMorgan Chase & Co (NYSE: JPM) announced that it’s profit climbed 36 percent to $2.7 billion, the news coming from another former financial stalwart is strikingly different.
CIT Group (NYSE: CIT) is rumored to be close to bankruptcy talks and its shares took a dive this morning as the United States government said it wouldn’t rescue it a second time.
That’s pretty clear language that “firms not vital to the inner workings of the financial system” would not be saved like many larger banks have been. It’s harsh and it’s ugly, and it’s called capitalism.
But it’s unclear what the total national economic impact will be from these smaller collapses.
CIT did a large amount of business with small and medium sized commercial loans, so it will be interesting to see what kind of impact this will have on the already tenuous commercial real estate sector.
Shares have plummeted over 78% today as the likelihood for a bankruptcy becomes greater – It would be the biggest since Lehman Brothers went under.
But is it a forgone conclusion right now, like a ball pushed too far over the cliff? Once rumors of Lehman’s bankruptcy were out, customers rushed to pull out money an move business across the street. This had the immediate effect of hastening the fall, becoming a self-fulfilling prophecy.
Is the same momentum at work here? Has the market already made its decision? We’ll know soon enough.
Symbols mentioned in this article: GS, JPM and CIT.
- CIT Rescue Shows Credit Isn’t Dead
- The Commercial Real Estate Sector: As The Other Shoe Drops – Be Wary of Bank Stocks
- What’s The Best Way Up?
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One Response to “CIT Goes Over a Cliff”
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July 16th, 2009 at 12:58 pm
From the article:
“That’s pretty clear language that “firms not vital to the inner workings of the financial system” would not be saved like many larger banks have been. It’s harsh and it’s ugly, and it’s called capitalism.”
Incorrect. Capitalism would be the government not bailing out any bank, large or small. What we have today is some sort of selective capitalism where the banks with the right political connections or are arbitrarily designated as “too big to fail” are bailed out by the government and the others are left to their own devices.
For free-market capitalism to work, the same set of rules need to apply to everyone.
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