Market Talk

CIT Group has a long road ahead

CIT Group’s (CIT) ominous financial situation just got a lot worse, now that the government has decided not to save the ailing lender.

CIT said “there is no appreciable likelihood” it’ll receive government aid in the near future, which has sent its shares down 75% to 41c in mid-afternoon trading. The lender is scrambling to line up at least $2B in rescue financing from existing debtholders, according to WSJ. Without the financing it’ll likely file for bankruptcy protection.

CIT is the first major financial company the government hasn’t propped up since the Lehman collapse. Several bloggers expressed optimism that the government showed restraint by not bailing out CIT, especially amid the recent bailout mania.

“CIT had friends, but not enough – and maybe this tells us something about the shifting political sands,” former IMF chief economist Simon Johnson writes at The Baseline Scenario.

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It should come as no surprise to anyone that bankers are fighting Obama’s proposed consumer-protection agency.

Lawmakers are reviewing the proposed Consumer Financial Protection Agency, which is intended to protect consumers from the financial industry. But the American Bankers Association has already complained that the new agency would “stifle product innovation.”

Can’t blame lobbyists for lobbying, Andrew Jeffery writes at Minyanville, but it’s not likely complaints from Citi (C), Wells Fargo (WFC), Bank of America (BAC) and others will do much good.

“When an industry displays an abject inability to make good decisions to the extent that its blunders nearly bring down the entire world economy, it should take its regulatory medicine and move on,” Jeffery notes.

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This thing turns around, we'll never be able to buy the house.

The blogosphere has a lot to say about Jim Cramer’s latest housing-bottom call.

The host of CNBC’s “Mad Money” show saidyesterday that rising housing starts and permits prove the glut of excess inventory is finally waning. He says ramping sales and falling prices during last three months are reasons to believe housing has bottomed out.

But Calculated Risk reminds that nearly every housing bust has two distinct bottoms: the first for activity and second for prices.

“Maybe this time is different, but I think Cramer is confusing activity for price,” blog says.

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Just taking it a little easier...

Lots of pundits have recently been cheering the notion that the recession may be nearing the end. But some think this cheerleading will only be premature excitement.

Unlike the Internet boom in the late ’90s and the housing bubble in the mid-2000′s, there doesn’t seem to be any current drivers for job growth, saysMichael “Mish” Shedlock, an investment adviser with Sitka Pacific.

“Unless another Internet bubble or housing boom is in the works, the odds of another huge jobs boom are anemic at best,” Shedlock writes on his blog.

He notes the unemployment rate could keep increasing for at least a year after the end of the recession is officially announced. “Let’s be realistic: premature excitement is in the air,” Shedlock says. “Don’t succumb to it no matter how much confetti anyone throws.”

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GM common shares trading around $1 still continues to defy conventional logic.

GM shares fell to as low as 27 cents after the automaker officially filed for Chapter 11, but have since rallied to as high as $1.01 and currently trade around 87 cents. A trip through bankruptcy court makes the shares essentially worthless, but that’s been expected for weeks and investors have still continued to buy.

GM will also be de-listed from the NYSE after today’s trading session and will begin trading on the Pink Sheets starting tomorrow.

The only explanation: these are strange times that continue to defy any sort of sensible logic, Minyanville’s executive editor Kevin Depew says.

“How is it possible to report in the same breath that General Motors is preparing to file for bankruptcy protection on the same day that Chrysler is emerging from bankruptcy without ducking under the desk to take a sip of whiskey from a flask? I don’t know either,” Depew says.

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Now that GM CEO Rick Wagoner has been forced out, where else will the hammer fall? Or will it fall at all? After all, much more government money’s been spent bailing out banks than auto makers. Why is Wagoner the first chief being replaced? Will other heads roll as well?

“This inconsistency from the new administration is very disappointing,” FusionIQ CEO Barry Ritholtz writes on his blog.

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The notion that taxpayers will ultimately benefit from Treasury Secretary Tim Geithner’s toxic-asset plan seems naively optimistic.

Andrew Jeffery, an editor at Minyanville, notes the government tried to reassure taxpayers six months ago they would profit during the rescues of Fannie Mae (FNM) and Freddie Mac (FRE). But with delinquencies on prime loans increasing and home prices tumbling, losses are likely to keep growing — as will the taxpayer’s obligation, he says.

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