CIT Bankruptcy Like to Affect Businesses
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Sometimes we forget that some of the things that affect big banks will come back to haunt the whole financial system as a whole. That might be the case with the looming CIT bankruptcy. The bank CIT has been having trouble with debt swaps and is verging on bankruptcy. The CEO of CIT, Jeffrey Peek, is resigning at the end of the year.
CIT and small business financing
Small businesses have been having trouble getting financing in the current climate. This is making things difficult for the millions of small businesses that provide a substantial portion of our economic activity. CIT provides the financing for about one million small businesses. A bankruptcy for CIT is likely to upset the workings of many small businesses, and have a profound effect on the economy — especially since few other banks are willing to provide small business financing right now.
The current credit situation is likely to get tighter
Right now, the credit situation is already tighter than it was not too long ago. A CIT bankruptcy is likely to cause problems with credit across the board — not just for small businesses. Indeed, if the credit situation tightens for small businesses, it means that the climate in general is poor for credit. And that means that consumers, including those looking for mortgage loans, could see problems when it comes to getting loans and finding financing.
It will be interesting to see what happens going forward, and how things go with CIT, and whether the company can find what it needs. However, the loss of CIT would be a big blow to our economy, and to the credit situation as small businesses do their best to find the financing they need. And it could spill over, creating a continuing situation in the broader economy and slowing recovery from the recession.
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October 14th, 2009 at 11:48 am
[…] that the general credit situation is unlikely to improve any time soon. The increasingly possible CIT bankruptcy offers proof of this. Indeed, there are concerns that until the employment situation improves, and […]