July 14, 2009

U.S. mulls rescue of small-business lender

The Obama administration is mulling whether to bail out a key small-business lender, a consideration analysts say underscores how fragile the U.S. economy is.

CIT Group, with about $75 billion in assets, wasn't in the government's stress tests of major financial firms, but caught the administration's attention because of its focus on small-business lending, considered critical for the country's economic recovery, The Washington Post reported Tuesday.

Administration officials met Monday to review CIT's problems and to consider possible action, a person familiar with the situation told the Post.

Treasury Secretary Timothy F. Geithner said Monday the situation is being watched closely.

I'm actually pretty confident in that context we have the authority and the ability to make sensible choices, Geithner told reporters.

The company's plight is spotlighted the Federal Deposit Insurance Corp., the independent federal agency that hasn't, to date, allowed CIT to join a program that helps companies sell debt to investors. Under the program, the FDIC guarantees to repay investors if the companies default, and officials have expressed concern about CIT's viability, the Post said.