All of you who were thinking that Obama would bail out Main Street... well.... it ain't happening!!!! The following news spells trouble for the economy and mainly small business.

Lending giant CIT on brink after bailout talks fail
By Rob Lever (AFP) – 3 days ago

WASHINGTON — Business lending giant CIT Group has been left hurtling towards likely bankruptcy after the US government rejected its plea for a fresh bailout despite fears of repercussions for the overall economy.

Shares in CIT plunged 75 percent to 40 cents in late trading Thursday on worries of an imminent collapse of the lender.

CIT Group, which specializes in financing for tens of thousands of small and medium-sized businesses, said late Wednesday it had been informed there would be "no appreciable likelihood of additional government support being provided over the near term."

Standard & Poor's downgraded the firm's credit rating to near-default territory of CC as analyst Rian Pressman said "there is an increased risk that CIT may declare bankruptcy in the near term or take other actions that will be detrimental to debt holders."

Fitch Ratings downgraded the long-term credit ratings of CIT Thursday, saying as much as 35 billion dollars in its debt could be near default.

CIT Group said in a statement that its board of directors and management "are evaluating alternatives" in consultation with its advisers.

"Fitch believes there is a high probability that the end result of this review will be that CIT will have to file for bankruptcy protection in the very near term," the ratings firm said.

"Fitch also believes the company's already tenuous liquidity position has been further eroded as its customer base has likely been drawing down on its available credit lines."

The decision not to bail out CIT comes after the US government injected tens of billions of dollars into the banking system and outlined a policy of helping large firms whose failure could lead to a shock to the financial system.

The Treasury has provided 2.3 billion dollars to CIT but indicated Wednesday no further aid is likely.

"Even during periods of financial stress, we believe that there is a very high threshold for exceptional government assistance to individual companies," the Treasury said in a statement.

A US administration official said the decrease in the level of loans granted by CIT Group over the past year indicates that the firm was not too big to fail.

But there were calls for Washington to reassess its position, with dire warnings about the impact of any CIT Group bankruptcy on small businesses.

The National Retail Federation said bankruptcy of the major lender could have severe consequences on the retail industry and the nation's economy.

"A failure of CIT would impact thousands of retailers and, consequently, the consumer spending that makes up two-thirds of our nation's economy," said NRF president Tracy Mullin.

Simon Johnson, an economist at the Massachusetts Institute of Technology, said CIT is not "too big to fail" despite its large portfolio.

"CIT's small and mid-size customers are important to the recovery. But the reckoning is that this business can be easily sold to someone else -- after all, this is exactly what bankruptcy can get right in the US," Johnson wrote on the blog "The Baseline Scenario."

"In the final analysis, CIT wasn't even big enough to meet (Treasury) Secretary (Timothy) Geithner face-to-face -- he's still out of the country."

In December, CIT Group won approval to change its charter to a bank holding company and received the capital injection from the US Treasury as part of an emergency rescue package.

The company is a major player in industrial loans including aircraft financing, but last year sold its real estate lending and had taken other steps to deal with the unprecedented credit crunch.