CIT bankruptcy filing one of largest in history

Manhattan-based commercial lending firm CIT Group filed for a prepackaged bankruptcy yesterday in the Southern District of New York, marking one of the biggest filings in U.S. history. The worldwide credit crisis and recession were named as the two biggest culprits in the downfall of one of the nation’s largest commercial lenders. The group received $2.33 billion last December as a part of the federal government’s Troubled Asset Relief Program, but the aid did little to stymie the rapid decline in value among the firm’s many investments. The loss is one of the biggest for the TALF program so far. While many of CIT’s creditors have reportedly agreed to the reorganization program, Jack Williams, a bankruptcy law professor, told Reuters that the bankruptcy could do even more to harm CIT’s stability. “The longer a financial institution stays in bankruptcy, the more the value of the business dissipates,” Williams said. “It’s faith and trust and perception that are so important for a financial institution.” The firm reportedly hopes to reduce its debt by $10 billion in the bankruptcy. CIT had $71 billion in assets and $64.9 billion in debt, according to mid-year figures.