CIT Group: The rise and fall of an American commercial finance giant

In the history of modern business, CIT Group is a name that cannot be ignored. As an American bank holding company founded in 1908, CIT Group has provided loans, consulting and leasing services to countless small and medium-sized enterprises in its more than a century of development. However, this once glorious company filed for bankruptcy protection in 2009 due to the financial crisis, becoming one of the largest corporate bankruptcy cases in the history of American business. This article will explore the historical background, business model, reasons for bankruptcy and its impact on the global economy of CIT Group.

1. History of CIT Group

The history of CIT Group can be traced back to 1908. In that year, John Pierpont Morgan (JP Morgan), the founder of JPMorgan Chase Bank, founded the Commercial Investment Trust, which was the predecessor of CIT Group. Initially, the company focused on providing consumers with installment payment plans to help them buy expensive goods such as cars and home appliances. This innovative financial service approach quickly attracted a large number of customers and enabled the company to grow rapidly in just a few years.

By the mid-20th century, CIT Group began to shift its business focus to the small and medium-sized enterprise market. This strategic adjustment enabled CIT Group to better meet the financing needs of small and medium-sized enterprises, while also providing them with a stable source of income. By providing a variety of financial products and services, such as loans, leasing and consulting services, CIT Group gradually established itself as a leader in financial services for small and medium-sized enterprises in the United States.

2. CIT Group’s Core Business and Market Positioning

CIT Group's main businesses are concentrated in the following areas:

• Loan services: CIT Group provides working capital loans, equipment financing loans and other forms of credit support to various small and medium-sized enterprises. These loan services help enterprises obtain the necessary financial support during the expansion process.
• Leasing Services: In addition to traditional loan products, CIT Group also provides a wide range of leasing solutions, including leasing services for aircraft, ships, medical equipment and other capital-intensive assets. This service is particularly popular with companies that want to optimize their balance sheets.
• Consulting Services: CIT Group's professional team provides corporate clients with advice and support in strategic planning, risk management and other areas to help them manage financial resources more effectively.

With these core businesses, CIT Group has successfully established a large client network covering a wide range of industries from manufacturing to services. Its unique market positioning - focusing on serving small and medium-sized enterprises that usually have difficulty in obtaining traditional bank loans - has enabled it to gain a foothold in the market.

3. CIT Group’s Peak Period

After entering the 21st century, CIT Group continued to expand its business and reached its peak in 2006. At this time, CIT Group has become one of the leading financial service providers for small and medium-sized enterprises in the United States, with total assets exceeding US$70 billion and more than 5,000 employees. The company not only has a strong influence in the United States, but also has achieved remarkable results in the international market.

However, during this period, a huge storm was quietly brewing in the global financial system. With the outbreak of the subprime mortgage crisis, the entire banking industry was facing unprecedented challenges. For financial institutions like CIT Group that were highly dependent on the short-term financing market, this crisis was particularly fatal.

4. CIT Group’s bankruptcy crisis

In 2008, the global financial crisis hit, and CIT Group found itself in a severe liquidity crisis. Since most of its funding came from short-term debt markets, which almost completely froze up during the crisis, CIT Group found itself unable to raise enough funds to maintain its daily operations.

Despite a series of emergency measures taken by the management, including cost cutting, asset sales, and seeking government assistance, none of this could stop the company's downward trend. Finally, on November 1, 2009, CIT Group formally filed for bankruptcy protection with the court. This event shocked the entire financial community because CIT Group was not only one of the largest bankruptcy cases in US history at the time, but also the first major financial institution to file for bankruptcy protection.

Fortunately, under the bankruptcy protection process, CIT Bank of Utah, a subsidiary of CIT Group, was able to continue operating. The bank survived as an independent entity and continued to provide essential financial services to customers.

5. Analysis of the reasons for CIT Group’s bankruptcy

The bankruptcy of CIT Group was not accidental, but the result of multiple factors:

1. Over-reliance on short-term financing: Under normal circumstances, obtaining funds through the short-term financing market is an efficient and low-cost way. However, in times of crisis, when market confidence is lost, this approach becomes extremely vulnerable. CIT Group lost its vital short-term financing channel at a critical moment, which led to the depletion of liquidity.
2. Inadequate risk management: Despite CIT Group’s extensive industry experience, its risk management system was clearly flawed in the face of a complex and volatile financial market environment. For example, the company failed to fully assess the potential default risk in its loan portfolio and did not promptly adjust its asset-liability structure to adapt to the new economic situation.
3. Deterioration of the external environment: The outbreak of the global financial crisis directly impacted CIT Group's core business. The operating conditions of small and medium-sized enterprise customers generally deteriorated, leading to an increase in loan default rates; at the same time, capital market volatility intensified, further weakening the company's profitability.

The combination of all the above problems eventually pushed CIT Group into the abyss.

VI. Reorganization and development of CIT Group after bankruptcy

Although CIT Group filed for bankruptcy protection in 2009, it did not mean the end of it. Instead, it was an opportunity to start over. During the bankruptcy protection process, CIT Group successfully completed debt restructuring and obtained support from the Federal Deposit Insurance Corporation (FDIC). In addition, some private equity investors also participated in it, injecting fresh blood into the company.

After a series of efforts, CIT Group gradually recovered and redefined its development direction. Today, it is still active in the field of small and medium-sized enterprise financial services in the United States and even around the world, and continues to provide customers with high-quality products and services.

VII. CIT Group’s Impact on the Global Economy

The rise and fall of CIT Group is not only a story of a company, but also a mirror reflecting the changes in the global economy. Its rise reflects the importance of financial services for small and medium-sized enterprises, while its failure reveals the fragility of the modern financial system.

First, the experience of CIT Group reminds us that even seemingly sound enterprises may fall into trouble due to changes in the external environment. Therefore, strengthening risk management and enhancing stress resistance are issues that every financial institution must pay attention to.

Secondly, the case of CIT Group shows that SMEs play an indispensable role in economic development. Without the support of professional institutions like CIT Group, many enterprises may not be able to survive and develop at all. This also shows that building a healthy and sustainable financial service system for SMEs is of great significance to promoting economic growth.

Finally, the bankruptcy of CIT Group has prompted regulators in various countries to pay more attention to systemic risk issues and promoted the improvement of relevant laws and regulations. For example, the Dodd-Frank Act is an important legislation introduced in this context, which aims to strengthen the supervision and management of the financial industry.

8. Conclusion

The story of CIT Group is an epic of success and failure, opportunities and challenges. From its original commercial investment trust company to today's leader in financial services for small and medium-sized enterprises, CIT Group has undergone countless changes and transformations. Although it was once on the verge of collapse, it finally achieved rebirth through unremitting efforts and firm belief.

Looking ahead, CIT Group will continue to be committed to creating value for small and medium-sized enterprises and play a greater role globally. At the same time, we should also learn lessons from this and continuously improve our capabilities to cope with the various challenges brought about by the increasingly complex financial environment.

If you want to know more about CIT Group, please visit its official website: www.cit.com .