Déjà vu All Over Again

Is Yogi Berra working in finance?

As the Yankees battle for their 27th potential World Series title, it seems like we’re seeing a replay of last year’s financial mess. CIT Group filed for bankruptcy yesterday. As the former Yankee player would say, it’s like déjà vu all over again.

We’ve seen this movie before: CIT needs cash but can’t raise it. Carl Icahn is willing to loan them fresh operating capital, but only if he can jump the line and get in front of all the other creditors—becoming a “debtor-in-possession.”

Well, last week management asked bondholders who they trust, and they voted overwhelmingly with Icahn. After all, Jeff Peek and his team led CIT into its mess in the first place. This plan keeps the operating companies out of court and CIT retains a reasonable chance of getting through this process.

In some ways, this deal reminds me of WaMu—a white-knight investor stepping in at the last minute to make the customers whole. But it happens at a vastly different time. Last year, WaMu’s ordeal fed a general sense of panic. By contrast, the CIT story has played out in slow motion, and was precipitated by the FDIC saying no.

Well good for the FDIC. If Icahn’s plan works, it will set a precedent as resolution of a huge financial company that doesn’t involve the Feds. As Yogi might say, “You can observe a lot by watching.”

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2017-07-17T12:35:21+00:00 November 1st, 2009|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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