At the end of the day, CIT had nothing. Their asset quality was poor, their systemic risk implications seemed limited, Sheila Bair dug in her heels, and Jeffrey Peek (CEO) didn't have sufficiently strong connections to get her overruled.
CIT had friends, but not enough--and maybe this tells us something about the shifting political sands. The Financial Services Roundtable (top financial CEOs) came out in force, the House Committee on Small Business reportedly made worried noises, and Barney Frank sounded supportive. But the American Bankers Association (the broader mass of bankers) publicly stood on the sidelines and Senate Banking--and prominent senators--seemed otherwise engaged.
CIT's small and mid-size customers are important to the recovery. But the reckoning is that this business can be easily sold to someone else--after all, this is exactly what bankruptcy can get right in the U.S.
So the question became: is CIT too big--on its liabilities side--to fail? And if $80bn financial firms are now "too big to fail," what does that imply for other potential bailout conversations and for our fiscal future?
In the final analysis, CIT wasn't even big enough to meet Secretary Geithner face-to-face--he's still out of the country.
The bottom line: we need fewer $800bn firms and more $80bn firms. If Goldman Sachs were broken into 10 independent pieces, we could all sleep much more soundly.