CIT Group is estimated to have approximately $75 billion in assets and after 8 straight streaks of losses it should continue to incur additional $6 billion.
At $75 billion, that’s about 150% more than Bernie Madoff allegedly stole from clients in his ponzi scheme. The problem with a ponzi scheme is that the money burns exponentially. CIT Group has helped fuel the manufacturing of everything from textiles and clothing to consumer electronics.
Manufacturers trying to take out every stage of production and distribution, lifting and re-lifting the same products over and over again, could do something akin to a legal micro ponzi instrument backed by CIT Group guarantees.
CIT Group does not have capital on hand to secure those securities and their cash crisis in liquidity during the recession. Governments and banks must now ask themselves what the direct exposure to a failing CIT group is. Jamie Dimond of JP Morgan Chase feels that CIT Group exposure is not material for his company.
As I have had direct experience in doing business with CIT Group, my own account partially covered here, I believe the bank with the greatest direct exposure to failure is going to be HSBC’s CIT Group.
Will the World’s Largest Banks Fail Because of CIT?
A few years back the CIT Group was absorbed into the HSBC group, which naturally did a lot of business with HSBC. CIT Group in undertaking business books and the risk that went with it, not to mention the many employees of hsBC also undertaken business with risk and they took up strong business connections.
The multi-billion dollar question now is “How much exposure does HSBC have to the failure of CIT Group?” and the question later will be “If HSBC fails or fails because of the famous CIT disaster, how will the Chinese economy be affected?”
HSBC is the world’s largest banking group and the world’s sixth largest company according to Wikipedia with $2.3 trillion in assets as of Feb 2008 according to Forbes. The crisis under the first mortgage and HSBC’s acquisition of the host bank resulted in HSBC’s receipts being reduced by $40 billion in the last 12 months. Many people see HSBC as having significant consumer exposure, think about all those consumers credit-card-industry”>credit driven to retailers around HS.
Add to this the perfect trifecta of CIT Group’s exposure to debt not only from consumers buying goods, but retailers, distribution companies, and manufacturing companies themselves. HSBC managed is positioned to be on the cusp of the next wave of financial defaults.
Tonight as America eats dinner and gets ready for bed, banks based in HongKong and Shanghai Banking Corporation (HSBC) will have to consider whether the failure of the CIT and the effects of that failure on China’s manufacturing sector, the seller of America. sector and perhaps a multitude of department store-credit-cards”>store credit cards holders as well.
China’s future and stability straight to CIT . be conquered
China cannot have an interest in the financial affairs of protecting Americans from their real stupidity. But youth The Chinese manufacturing economy may have the best interest in maintaining the CIT Group and avoiding all Chinese kryptonite, unexpected unemployment in the continent a quarter of a billion migrants. If HSBC can help weather the storm, if HSBC’s seawalls can contain the effect of sea waves on failures, then maybe CIT is small enough to fail. If HSBC is not strong, it cannot afford much more cash, then China needs to open the cash coffers to the 50+ savings it has saved over the past years and save itself CIT.
Report:
- www.reuters.com/article/ousiv/idUSTRE56F55P20090716< /li>
- www.associatedcontent.com/article/1938154/cit_bomb_to_kill_chinese_manufacturing.html< /a>
