Taxpayers “loaned” CIT Group $2.3 billion under the TARP program in 2008.
At the time, government officials justified the bailout by noting that CIT Group was an important source of capital for small businesses. However, a year later, CNN noted that CIT Group had only originated 142 SBA small business loans in 2009, as compared to 1,203 loans in 2008.
After receiving the $2.3 billion from taxpayers, it was not enough to keep CIT Group afloat, so the company attempted to pressure the FDIC into giving the bank a second bailout via the Temporary Liquidity Guarantee Program, or TLGP (See this Reuter’s article: CIT lost in gamble to pressure FDIC). However, the FDIC, sensing how bad of shape CIT Group was in, declined to offer more support for the bank.
CIT Group ended up filing bankruptcy, meaning the $2.3 billion it owed to US taxpayers was magically erased. Even worse, CIT has told Wall Street investors that it plans to use its 2009 bankruptcy to further reduce its taxes if this merger is approved.