INSTANT VIEW: CIT bailout talks collapse

NEW YORK (Reuters) - CIT Group Inc, a major lender to small- and mid-sized U.S. businesses, on Wednesday said talks with the U.S. government to bail out the company have ended, which could make a bankruptcy likely.

"Discussions with government agencies have ceased," the New York-based company said in a statement. "There is no appreciable likelihood of additional government support being provided over the near term."

The following are comments on CIT:

COMMENTS

MIKE KNEBEL, PORTFOLIO MANAGER SPECIALIZING IN FIXED INCOME AT FERGUSON WELLMAN CAPITAL MANAGEMENT, IN PORTLAND, ORE, WHICH MANAGES $2.2 BLN (UNTIL RECENTLY A HOLDER OF CIT BONDS)

"I would imagine it's going to lead them to some sort of restructuring through bankruptcy. If the Feds aren't going to supply CIT with access to affordable credit, it doesn't look like the market will either.

"At least in the eyes of the Fed and the eyes of the Treasury we've turned the corner such that the systemic kinds of risks facing the economy may be well past.

"Certainly, when you look at the recent earnings and other parts of the banking sector, it tends to bear that out. They're certainly past the worst of it. That may be the good news in this kind of thing.

"The damage would seem to be focused more on the retail area and particularly the garment and clothing manufacturing segment of the retail industry, and that could certainly cause some serious fallout for them. I'm not sure whether there's a snowball effect there or not."

BRET BARKER, PORTFOLIO MANAGER WITH METROPOLITAN WEST ASSET MANAGEMENT IN LOS ANGELES

"In theory or normal times, a finance company like this goes down and other lenders step in to fill the gap -- not sure that happens this time as the so-called shadow banking system is gone.

"Treasuries might rally a bit but hard for bonds to rally if equities keep rallying and right now equities are bulled up as risky assets on fire."

DOUG KASS, HEDGE FUND MANAGER AT SEABREEZE PARTNERS MANAGEMENT IN PALM BEACH, FLORIDA

"This has a huge multiplier effect. It's a big negative for the market. But I would say that if this occurred a week ago, the S&P futures would be down 1 1/2 to 2 percent.

"You are talking about posing systemic risk, this is a company with over $50 billion of receivables out to small businesses. And not only is it questionable whether these loans will be withdrawn but going forward how are small businesses going to access the capital markets. It is a pretty big negative."

CAMPBELL HARVEY, PROFESSOR OF FINANCE, DUKE UNIVERSITY:

"There is an insufficient focus on small and medium-sized businesses. The main problem in this recession is joblessness.

"We have got a firm that focuses on small and mid-sized businesses. If the government wants a bang for their buck, I would put up the money to support CIT rather than something like AIG, which was almost a complete waste of money."

"This is an example of exterminating future green sprouts."

MARSHALL FRONT, CHAIRMAN OF FRONT BARNETT ASSOCIATES LLC, A CHICAGO INVESTMENT AND RESEARCH FIRM

"Many have come to believe that without government help in guaranteeing (CIT) debt, CIT will have a liquidity problem and probably file for Chapter 11.

"This could make a bad situation even worse. Seems to me there should have been lessons learned when Lehman was allowed to go down the drain. I think it is something that regulators should be forewarned on. There could be serious adverse unintended consequences potentially for thousands of small businesses."

JAMES BARTH, ECONOMIST, MILKEN INSTITUTE

"The government had already put slightly more than $2 billion into CIT and perhaps putting more money in would have been even riskier.

"Not all firms have to be saved and the government has to draw the line at some point. By and large I don't think it is going to be a catastrophe or become another Lehman Brothers, given the FDIC's apparent concern about the quality of the assets. And it provides opportunities to others."

MATT MCCORMICK, PORTFOLIO MANAGER, BAHL & GAYNOR INVESTMENT COUNSEL, CINCINNATI

"Similar to AIG, it's something that could have broad impact on funds and securities-- many people don't realize that CIT has its hand in many organizations and companies across the land.

"We're due for some profit-taking, so investors could see this as an excuse. People have been riding a wave of semi-euphoria this week after Goldman's earnings and this could reduce risk appetite.

"The government is in the penalty box in terms of being able to bail out another financial company -- Joe Six-Pack wouldn't understand."

ERIC GOODISON, A CORPORATE FINANCE ATTORNEY WITH PAUL, WEISS, RIFKIND, WHARTON & GARRISON

"CIT's inability to meet its obligations could have ripple effects to those small- and mid-market borrowers who have CIT as their lender.

"It would be a disaster for them.

(Reporting by Jonathan Spicer, Jennifer Ablan, Lilla Zuill, Peter Henderson, Walden Siew, Paritosh Bansal and Phil Wahba)