Includes information about GE's planned withdrawal from the Temporary Liquidity Guarantee Prorgam.)CIT Group's ( CIT) business model may have been exposed as obsolete during this crisis, but there are signs of hope for similar companies. CIT, which narrowly staved off
But what about smaller companies that rely upon wholesale funding? Some, like NewStar Financial ( NEWS) appear to be struggling, and savvy observers like Cumberland Advisors CIO David Kotok are writing their obituaries. "If CIT is too small to live, which is the opposite of too big to fail, that would mean anything which is smaller than CIT is also too small to live," Kotok says. "All of them are now living in a glass bowl and their funding costs are going up every minute as lenders and suppliers of cash, capital and debt rethink their exposures because of CIT." Surprisingly, though, there are some apparent survivors out there, like CapitalSource ( CSE). The Chevy Chase, Md.-based company saw its shares trade below $1 a share earlier in the year, but is now on the rebound. Shares of subprime auto lender AmeriCredit ( ACF), while down more than 50% from their pre-crisis levels, are nonetheless trading near 52-week highs. Each company is a different story, in some respects. AmeriCredit, for example, benefits from the fact that consumer loans are easier to package together and use as collateral to sell bonds than the type of commercial leasing obligations that CIT has on its books, according to Chris Brendler, analyst at Stifel Nicolaus. CapitalSource benefits from the fact that, after acquiring a bank last year, it has a much larger deposit base relative to its total assets than CIT does, according to Sameer Gokhale, analyst at Keefe, Bruyette & Woods. That is not to say that life is easy these days for the small guys. It is much more costly for AmeriCredit to borrow money than it was before the crisis hit, Brendler says. And CapitalSource CEO John Delaney says about 25% of the loans the company has made in the past cannot be made using bank deposits. But CapitalSource and AmeriCredit are starting to see an appetite for their bonds among investors for the first time since the crisis hit. Even while CIT fought for survival on Tuesday, CapitalSource was in the market selling $300 million of five-year bonds. And Delaney believes there is a future for a new crop of companies to make the loans that don't meet regulators' standards. This new breed of lender will use low leverage and will have to put up collateral. That stands in contrast to CIT, which has borrowed heavily in unsecured markets. One example may be Colony Financial, an affiliate of private equity firm Colony Capital that filed with the SEC June 30 in preparation for an initial public offering. The company said in its filing that it intends to make commercial real estate loans, among other activities.