According to an article in Bloomberg, CIT Group Inc., a 101-year-old commercial lender is facing a possible bankruptcy as it has failed to secure an emergency loan to pay creditors. If CIT Group (not Citigroup) files bankruptcy it will be the first bank who received TARP funds to do so.
The article said:
"A bankruptcy filing may be the first by a company that took money from the Troubled Asset Relief Program, the Treasury's $700 billion fund designed to keep lenders solvent by investing the public's money in the financial industry. "We don't have any prior experience with a bankruptcy filing by a TARP recipient," said Kathleen Shanley, a Chicago- based bond analyst for Gimme Credit LLC. "It is possible the U.S. TARP investment could be wiped out."
Also, 1 million of CIT Group's customers, including 300,000 retailers may lose access to credit if the lender files for bankruptcy. Many analysts fear that a CIT Group bankruptcy could devastate retailers who are already struggling in this sour economy. And with the existing difficulty in securing access to credit, some retailers may succumb to bankruptcy themselves. But despite this fear, the government has given a clear indication that they are hesitant to assist the troubled lender again. Many experts expect a CIT Group bankruptcy within a month.