HispanicBusiness

U.S. taxpayers lost a bet Sunday as CIT Group, a critical lender to moderate-sized business filed for court protection despite a $2.3 billion federal bailout.

The New York firm that provides loans primarily to about 1 million companies said it would transfer ownership to creditors in a "prepackaged" bankruptcy proceeding that was expected to take less than two months, with the firm emerging by the end of the year, The Washington Post reported Sunday.

"The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small-business and middle-market customers, two sectors that remain vitally important to the U.S. economy," said Jeffrey Peek, CIT's chief executive officer, who will lose his post as creditors take over.

The firm received a bailout package in December 2008 and filed for a second helping in July, at which point the Treasury Department turned it down on the premise that the economy could tolerate the firm's failure.

But the plan now is dicey, analysts said. First, there is "no guarantee" the plan will put the company back on its feet, said Scott Peltz, managing director of restructuring at RSM McGladrey.

Bondholders are scheduled to recoup about 70 cents on the dollar, while taxpayers will find themselves in the hole for the first time since the $700 billion Troubled Asset Relieve Program was assembled last fall.

How much the failure reverberates through the economy is one question; how much it shakes the world of finance is another.

The Dow Jones industrial average took a 250 point beating Friday, dropping 2.5 percent for the day in a month that turned suddenly volatile with 10 triple-digit moves in the market.

For all that movement, the DJIA ended at virtual standstill, closing at 9,712.28 Sept. 30 and at 9,712.73 Oct. 30.

If it boils down to confidence, the wild swings are no friend to investors, analysts said, as the news the gross domestic product rose 3.5 percent in the third quarter did little to pump markets in the last week of the month.

But the kickoff of the Growth Enterprise Market in China Friday showed investor confidence wasn't entirely out of fashion, The New York Times reported.

The technology exchange opened with regulators suspending trades on 28 freshly listed companies on the opening day to calm a buying frenzy that sent share values up 210 percent for some firms.

"This is potentially a game changer in China's high-tech industry. For about 10 years, the biggest problem for China's innovative companies was finance," Yu Zhou, a Vassar College professor told the Times.

The GEM index took a corrective turn Monday, dropping 10 percent, but the opening was more successful than anticipated, with the 28 companies raising about $2 billion on the first day.

Following Friday's downturn on Wall Street, the Nikkei 225 in Japan fell 2.31 percent Monday. The Shanghai composite index in China rose 2.7 percent, while the Hang Seng index in Hong Kong lost 0.61 percent. The Sensex index in India lost 0.97 percent, while the S&P/ASX index in Australia dropped 2.21 percent.

In midday trading in Europe, the FTSE 100 in Britain rose 0.59 percent, while the DAX 30 in Germany rose 0.06 percent. The CAC 40 in France added 0.56 percent, while the pan-European DJ Stoxx 50 added 0.12 percent.