CIT: How many more bailouts to come?

Update: CIT shares were halted Wednesday. A source says that U.S. officials are concerned that CIT's woes have deteriorated further which could possibly land the company in bankruptcy. A decision is expected within 24 hours.

CIT Group Inc. (CIT) is close to getting a set of short-term loans to tide it through a liquidity crisis.

The Wall Street Journal, which broke the story about the financial firm's instability, reports that customers worried about the company drew down hundreds of millions of dollars on credit lines. The paper reports that the firm may be allowed to transfer some assets from the parent to financial divisions so that "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."

After all of the TARP money put into dozens of American banks and a modest bailout of part of the insurance sector, the question is: how many CIT's are still out there, ticking bombs in the financial system? Some analysts compare AIG's problems to those "hidden" in the balance sheet of GE's (GE) financial arm, although because of the size and borrowing resources of the parent company, that is almost certainly a stretch.

There are a number of financial institutions that have not gone to the government, yet. These may include credit unions and the credit card units of large retailers who are being hit by defaults that will almost certainly rise.

It might have seemed like the Treasury and Fed had put their bailout days behind them and that enough money had been put into the market to give it adequate liquidity. That probably is not true. The CIT problems arrived out of the blue. Consumer credit, business lending, and commercial real estate are still troubled enough that the government could need to supply capital to financial firms for months.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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