CIT Group, Inc. New Common (CIT)

[Poor_But_Happy]

Security Violations

Here is what happened with CIT last year when they Bankrupted:

- In October of last year, they released the "offers" where the "exchanges" showed equity getting a few percent, yet the "Pre-Pack" option had equity being canceled.

- Icahn gets involved and pushes for the Pre-Pack option (you can read up more about what he did in this doc:
http://works.bepress.com/cgi/viewcontent.cgi?article=1002&context=jonathan_lipson
which starts around page 15)

- On Friday Oct 30th, just before the Bankruptcy is announced Icahn gives an interview with Fox news in which he states when ask about the equity "I think they get a couple percent, but it is something they worked out".

- On the following Monday the bankruptcy is announced. The first judge assigned to the case is replaced within hours with Mr Gropper, who then quickly issues a press release saying "this is going to be a quick bankruptcy!". This effectively removes any chance of equity having a say in the matter, as equity's only play is to somehow delay the bankruptcy to go over the "evaluation" in more detail.

- No equity committee was assigned, yet there was significant amount of equity showing on the books before and during the bankruptcy proceedings.

- While TARP was not present in the bankruptcy hearing, other large financial organizations were (Citi's lawyers attended). BAC alone owned $7.5B in CIT debt, which because of the quickness of the bankruptcy has now currently recovered by more than $2.3B. By a lucky coincidence they (and Citi and friends) are able to pay off their TARP loans faster.

- During the bankruptcy confirmation trial, the judge is asked why the 60 days on the CVRs, and his reply is "it is something they worked out". Surprisingly enough, TARP is not in the court room, and is not represented by any legal entity (other than indirectly via Citi's lawyers). We never really find out who "they" are, but it is rather apparent.

- After CIT emerges from bankruptcy over $1.6B in student loans are written off. This fits in nicely with the new administration's student loan agenda:
http://www.buzzle.com/articles/obama-student-loans.html

- Because of the ownership change, the tax losses that CIT has built up in the previous years is reduced, which the government directly benefits from.

- TARP issues a press release shortly after their CVRs expire stating "that we treated this like any other investor would".

What is even more surprising to me is that the current administration is coming down so hard on the "little guys":
http://blogs.wsj.com/deals/2010/12/16/employees-of-flextronics-amd-arrested-for-insider-trading/
yet it is readily apparent (without resorting to wiretapping, just reading press releases) that a massive security fraud was committed by TARP and others in the current administration with CIT's bankruptcy.

As a previous preferred holder, I now realize there is not going to be any recovery at all. The government has already recovered indirectly (and directly) its $2.3B investment, and since they committed fraud they really do not want this to be "reopened" in the coming years. They would much rather it just slip silently below the radar.