Bailed out CIT files bankruptcy, costing taxpayers $2.3 billion

Small-business lender CIT Group Inc. has filed for Chapter 11 bankruptcy in the fifth-largest corporate bankruptcy in U.S. history.

The beleaguered company, which had its roots in basic, no-frills loans to fast-food restaurants, clothing stores and the like, ran into trouble after a former Merrill Lynch executive took the helm in 2003 and pushed CIT into more exotic and risky investments that turned sour when the economy took a nosedive.

The part of the process that's most likely to upset average citizens is this: The terms of the bankruptcy filing wipe out CIT's obligation to pay back $2.3 billion it received from the government in December as part of the TARP program. The bailout was intended to get the company back on its feet, but things didn't go as planned and the lender was back roughly six months later, hat in hand again.