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To: Cooter
Small business loans can be for several purposes, including real estate, inventory, capital equipment, etc. IMO, CIT's problems are more due to the general decline of economic activity. Small businesses are seeing profits dry up or disappear, and can't pay back their loans.

True enough but as you point out business loan failures are a precursor to commercial real estate losing tenants and then cascading into failure. CIT could be the first shoe to drop in this second big spike down. A whole different kind of bank will fail, more trillions in bailouts, unemployment accelerating back to levels seen in january.

31 posted on 07/16/2009 11:30:14 AM PDT by drangundsturm
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To: drangundsturm
Yes. I think of CIT as the canary in the coal mine.

Is is probably more sensitive to this downturn than a pure commercial real estate lender would be. The assets it can repossess are things like retail inventories from small shops and brake presses and milling machines from light industry. I would imagine thee type of things would go for pennies on the dollar at auction. Relatively speaking, a 50% drop in real estate prices would have less impact on its balance sheet than a 90% drop in the price of these other assets.

The question for me is the timing. How far away is this commercial real estate collapse - weeks or months?.

34 posted on 07/16/2009 12:44:04 PM PDT by Cooter
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