Move over Lehman Brothers, WorldCom, Washington Mutual and General Motors. You've got company. And U.S. taxpayers are picking up the tab.
Small business lender CIT Group filed for Chapter 11 protection on Sunday, one of the five-largest bankruptcies in U.S. history. The company ultimately could not trim down its $10 billion of debt load following a failed debt exchange offer. According to its bankruptcy petition, CIT had $71 billion of assets and $64.9 billion of liabilities on June 30. The reorganization plan calls for unsecured debt holders to receive 70 cents on the dollar of new notes plus new common stock. As for the old shares of CIT -- for all you smiling shorts looking to close out positions -- those worthless scraps can now be found trading on the Pink Sheets for about 20 cents. So what about "our" preferred shares, by which we mean the $2.33 billion in taxpayer money the U.S. government invested in CIT through the Troubled Asset Relief Program last December? Are we going to see any recovery? Maybe a few pennies on the dollar? Don't count on it. Treasury Department spokesman Andrew Williams said that "recovery to preferred and common equityholders will be minimal." If that's the case, it would make CIT the first realized loss for the $700 billion TARP program, a dubious distinction if there ever was one. Then again, it was a truly dubious investment from the very beginning, one which still leaves us scratching our heads. Last December, CIT was anointed a bank holding company worthy of saving with taxpayer billions. Ten months later, the government is writing off the loss with little more than a shrug. Could somebody please tell us what we got for our money? Didn't think so. Dumb-o-meter score: 85 -- If CIT was not too big to fail, why did we save it in the first place?