CIT’s Bankruptcy Filing Costs Taxpayers $2.3 Billion
CIT Group Inc., one of the nation’s largest bank and a major lending to small businesses, announced Sunday it would file for Chapter 11 bankruptcy, less than a year after receiving $2.3 billion in federal stimulus money.
CIT is the largest bank to fail after receiving support under the government’s Troubled Asset Relief Program, according to the Chicago Tribune.
With an estimated $71 billion in assets, CIT’s bankruptcy filing is the fifth-largest in U.S. history. CIT Group has up to $65 billion in debts—including a $4.5 billion loan received last week, according to the New York Times.
Although CIT received government assistance, it still found difficulty issuing low-interest loans to businesses. The bank asked for additional government aid earlier this year, but was declined.
CIT said that only the parent holding company was involved in the bankruptcy filing, and that most subsidiaries would remain operating during the Chapter 11 reorganization. However, some economists worry that more than 1 million small-to-medium businesses will find difficulty getting loans, similar to the credit freeze that shook the economy last autumn.
