New Deal to Save Main Street Lender
CHETRY: Well, unfolding as we speak, the leading lender for Main Street who is in desperate need of help could actually get a bailout. It's not from Uncle Sam, though. CNN's Christine Romans joins us now with details on a deal to save CIT. You told us we need to know why CIT matters. They're responsible for helping some of these small businesses out.</s>CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: That's right. And tens of thousands of small businesses this morning are trying to figure out just what kind of deal it will be, who will help them. Will it be the bondholders? Will they be able to salvage this company? All weekend that's what they were working for. And this is why CIT matters to so many people on Main Street.</s>ROMANS (voice-over): There are many storms at his store in Middleboro, Massachusetts, but he's never seen one like this.</s>BOB SAQUET, OWNER EGGER'S FURNITURE: I'm not about to call it quits and throw in the towel. Now we'll be around. We'll find suppliers. I just feel sorry for the manufacturers that I would lose.</s>ROMANS: His is one of a million small businesses that depend on the CIT group, the latest lender to face financial ruin. CIT was denied a bailout last week by the federal government because its failure wasn't deemed detrimental to the financial system as a whole. CIT did receive $2.3 billion as part of the initial Bush administration bailout last fall. But this time, the Treasury Department issued a statement citing "a very high threshold for exceptional government assistance." Bottom line, CIT wasn't big enough to get help. The National Retail Federation says that was a mistake.</s>MALLORY DUNCAN, GENERAL COUNSEL, NATIONAL RETAIL FEDERATION: What we're saying is that CIT is too important to fail. It literally finances the lifeblood of the retail economy.</s>ROMANS: CIT specializes in a type of lending called factoring. Factoring keeps businesses afloat so they can stay operational while they wait for the money to roll in.</s>DUNCAN: If CIT is not there, that 80 to 90 percent up front cash that the supplier needs in order to produce more goods to sell to another retailer isn't available and consequently is likely the supplier will go out of business.</s>SAQUET: Maybe from the big picture CIT is too small to deal with, but from the bottom end, this is the small business that dwells.</s>ROMANS: Saquet says he doesn't know why the government bailed on CIT's bailout, but he fears that decision may need lights out for small businesses across the country.</s>ROMANS: And that's why so many are nervous this morning about just what sort of deal CIT will get and how much breathing space it will allow them. This is a company that has cash flow problems. This is a company who many of the people it's lending money to aren't able to pay their loans back. It's something we've seen again and again and the economy is tough. We don't know the details yet, what kind of deal there is, if any right now, but we know that that deal does not involve the United States government. New phase, we're turning a new phase in those financial bailouts. This time the government stepped back and said Wall Street and free market economy, you've got to handle it on your own.</s>ROBERTS: What are the chances that CIT is going to be able to restructure enough loans that can at least maintain some cash flow?</s>ROMANS: In the very near term, that's what they're trying to do, to buy themselves some time. What the "Wall Street Journal" and the "Financial Times' are reporting is that the deal that's been worked out is a very punitive deal, 10 percent plus interest rates on those loans. That would just buy them a little bit of time to keep the cash flowing -- to keep the cash flowing from Main Street while CIT tries to figure out how to keep its own cash flowing. So this is not the end of the story, I think, John and Kiran.</s>ROBERTS: Christine Romans "Minding Your Business" this morning. Christine, thanks so much. He was the "most trusted man in America." He passed away at the age of 92 on Friday. Up next, Dan Rather standing there beside Walter Cronkite in this old photograph with his reminiscences of America's anchorman. Stay with us. We'll be right back. It's 18 minutes after the hour.