Updated with CIT's agreement with Carl Ichan
NEW YORK (
) -- The decline in financial shares deepend Friday afternoon, leading the entire market to the downside, as yesterday's strong GDP-fueled rally withered into memory and as data came out today that showed further declines in American consumer
The Dow Jones Indstrial Average
plunged more than 200 points, or 2.2%, while the Dow Jones Financial Services Index surrendered 2.5% in afternoon trading Friday.
In the biggest company-specific news of the day, word spread that
would file for a
as early as Sunday, with Carl Ichan reportedly agreeing to a deal.
The bank had already reached a pact to amend the terms on its $3 billion loan from
, which was supposed to receive a $1 billion payout if CIT filed for bankruptcy. The deal trims the loan to $2.13 billion; CIT will effectively give up the amount of the loan it hasn't already taken, and pay Goldman a termination penalty of $285 million.
Trading in CIT shares, halted earlier in the session Friday as the bankruptcy news emarged, was frantic. The stock was changing hands recently at 77 cents, down 18%, on volume of nearly 80 million shares.
Goldman Sachs' stock, meanwhile, dropped 3.5% to $172.43.
Secretary Timothy Geithner told a Congressional panel that the Obama administration's banking-regulation reform plan would allow the government to force giant financial firms, even if performing well, to break apart, if the government felt their sheer size imperiled the health of economy.
The catchphrase Geithner used was "shrink and separate," and his remarks were clearly directed at the handful of megabanks to have emerged from the credit crisis:
Bank of America
Shares of JPMorgan lost 4.3% to $42.49; Citigroup declined 4.6% to $4.11; Bank of America gave up 4.5% to $15.03; and Well Fargo shed 2.3% to $27.92.
In an interesting side note, the
reported Friday that, back in 2001, JPMorgan sent up internal red flags about the trading practices of the Galleon Group, the hedge fund run by now-accused insider trader Raj Rajaratnam.
Elsewhere, insurer equities were taking a beating along with every other financial sub-sector. Disappointing quarterly results from giants
didn't help matters. The companies' shares fell, respectively, 8% to 33.85 and 5.5% to $38.92.
On a day like Friday's session, however, surpassing expectations wasn't enough to lift a stock price. Case in point: The securities-exchange operator
beat Wall Street targets when it reported
Friday morning. Still, profit for the firm was lower by 28% from the year-ago period. The company's shares were trading recently at $25.90, down 6%.
-- Written by Scott Eden in New York
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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.