Transcripts

CIT Files for Bankruptcy Protection

PAUL KANGAS: Nearly a million small business owners are struggling tonight to come to grips with the bankruptcy of CIT. That's the company they depend upon for financing. As Scott Gurvey reports, the failure of the 101-year-old commercial lender is being felt as much on Main Street as Wall Street.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: CIT is a lender to a million businesses ranging in size from Dunkin' Donuts and Eddie Bauer to mom and pop storefronts in neighborhoods across the U.S.A. Bankruptcy attorney Ed Neiger says his phone has been ringing off the hook with calls from clients seeking help.

EDWARD NEIGER, BANKRUPTCY ATTORNEY: They borrow money from CIT and they just don't know how this will impact their business. They don't know whether CIT will continue lending money to them. They don't know whether they can look for another lender to lend money on their receivables. They don't know whether another factor will lend them money on their receivables that are encumbered to CIT. They just don't know.

GURVEY: Neither does anybody else. CIT has an agreement with a majority of its creditors for a prepackaged reorganization which will leave the creditors owning the company, but the reorganization of a major financial firm like CIT is uncharted waters. The Lehman Brothers bankruptcy ended in a court-supervised liquidation, while AIG was deemed too big to bankrupt and so it was bailed out by the Federal government. After getting one round of bailout money, Washington decided CIT was not too big to fail, a decision questioned by Todd McCracken of the National Small Business Association.

TODD MCCRACKEN, PRESIDENT, NATIONAL SMALL BUSINESS ASSOCIATION: They felt that they couldn't go as far as some would have liked and do as much as they thought they needed to do to protect taxpayer money. Of course, we have some sympathy for that argument, but we're just a little bit frustrated that they reached the point where they were more concerned about taxpayer money than other things at the point where it was a small business lender that was in jeopardy of failing.

GURVEY: The CIT saga has raised again the issues of Main Street versus Wall Street and big business versus small. But for the time being, the experts advise that small business owners hang tight and let the process play out.

NEIGER: Right now, I'm telling them what the company is telling me and that is: business as usual. They're going to continue getting funds. They have to continue repaying what they owe and balancing that against the receivables that they have.

GURVEY: CIT's common shares will be worthless after this bankruptcy and that includes the shares owned by taxpayers at a cost of $2.3 billion. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.