(Updates with quote from CIT Chairman)
By Sarah N. Lynch Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- The Federal Reserve Board on Monday approved an application from the global commercial finance company CIT Group Inc. (CIT) to become a bank holding company in a move that could give the company access to additional capital from the Fed and the U.S. Treasury.
The company announced its decision to apply to become a bank holding company in mid-November, saying that approval from the Fed would allow CIT to possibly receive a capital injection from the U.S. Treasury. In addition, bank holding companies are eligible to borrow from the Fed's discount window.
"Today's announcement is an inflection point in CIT's 100-year history," said Jeffrey M. Peek, Chairman and CEO of CIT Group. "Bank holding company status is expected to provide us increased access to funding and a new platform from which we will serve our middle market and small business clients. We believe this step should ultimately enhance the value of our franchise."
The Fed's decision to green-light the company's application comes just a few days after Standard & Poors downgraded CIT's credit rating from "A-" to "BBB+."
The change to bank-holding status will essentially convert the Salt Lake City-based CIT Bank, a subsidiary of CIT Group, into a state bank.
"In light of the unusual and exigent circumstances affecting the financial markets, and all other facts and circumstances, the Board has determined that emergency conditions exist that justify expeditious action on this proposal," the Fed said in its order.
CIT isn't the first financing company to become a bank holding company since the financial crisis his Wall Street. Last month, American Express & Co. (AXP) got emergency approval from the Fed to convert into a bank holding company. AMEX's approval was granted just a few days before the deadline to apply for the Treasury Department's Capital Purchase Program.
GMAC LLC, the big lender co-owned by General Motors Corp. (GM), has also sought bank-holding-company status, although questions have been raised about whether it can raise the capital needed to become a bank holding company.
Investment banking giants Morgan Stanley (MS) and Goldman Sachs Group Inc. (GS), meanwhile, became bank holding companies back in September.
CIT has consolidated assets totaling about $80.8 billion, according to the Fed. CIT Bank has consolidated assets totaling $3.1 billion and controls deposits totaling about $2.3 billion.
-By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634; sarah.lynch@dowjones.com
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Publié le 22 Décembre 2008 Copyright © 2008 Dowjones