CIT Group Inc. (CIT) and federal regulators are working out details of an aid package designed to help the lender resolve its deepening liquidity crisis, the WSJ reported late Tuesday, citing people familiar with the matter.
The outlines of the plan began to emerge late Tuesday as CIT’s financial position deteriorated. Worried customers drew down on their credit lines on Monday and Tuesday, draining hundreds of millions of dollars from CIT, the people said.
Under the plan regulators would allow CIT to transfer assets from its holding company to its bank in Utah; the Federal Reserve would let CIT pledge some of those assets at its discount window and the company would take steps to refinance some of its existing debt.
Government officials remain split over how much help CIT should be offered and some feel that CIT could be trying to overhype the consequences of its potential collapse to scare Washington into action.
The FDIC remains hesitant giving CIT access to its debt program. Sheila Bair most probably isn’t satisfied with the lender’s collateral.