NRF Calls CIT Group Too Large To Fail, Asks Obama Administration to Provide Assistance
WASHINGTON, July 15, 2009 – The National Retail Federation today asked the Obama Administration to provide government assistance to CIT Group Inc., saying failure of the major lender could have severe consequences for the retail industry and the nation’s economy.
“If the criterion for whether a financial institution should receive government assistance is whether it is ‘too large to fail,’ CIT is most certainly too important to the retail industry to be allowed to fail, and the retail industry is too important to the economy to be placed under additional stress,” NRF President and CEO Tracy Mullin said. “A failure of CIT would impact thousands of retailers and, consequently, the consumer spending that makes up two-thirds of our nation’s economy. That cannot be allowed to happen at a time when retailers are already struggling to survive the national recession.”
Mullin comments came in a letter to Treasury Secretary Timothy Geithner and Federal Deposit Insurance Corporation Chairwoman Sheila Bair. CIT has applied to participate in the FDIC’s Temporary Liquidity Guarantee Program and said this week it is also pursuing other liquidity solutions.
Mullin told Geithner and Bair that CIT is one of the few lenders who act as a “factor” for thousands of small and mid-sized vendors who supply U.S. retailers with much of the merchandise sold in their stores. Vendors typically accept orders from retailers with an agreement to be paid in 90 days. They then sell their accounts receivable to a factor in order to obtain the short-term financing needed to produce the goods ordered. Without factors, suppliers could be forced to shut their doors or retailers would be required to pay up front and draw down on their own credit lines at a time when credit remains difficult to obtain.
“If CIT were to fail, a chain reaction would be set off that could very well leave retailers with a shortage of merchandise during the crucial holiday season this fall,” Mullin said. “I strongly urge the (Administration) to take a very close look at the important role CIT plays in the retail industry and act appropriately to ensure that this essential lending institution remains economically viable. The jobs of countless hard-working Americans are at stake.”
The National Retail Federation is the world's largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores as well as the industry's key trading partners of retail goods and services. NRF represents an industry with more than 1.6 million U.S. retail establishments, more than 24 million employees - about one in five American workers - and 2008 sales of $4.6 trillion. As the industry umbrella group, NRF also represents more than 100 state, national and international retail associations. www.nrf.com.