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The Federal Reserve Board on Monday approved commercial finance firm CIT's bid to become a bank holding company, clearing the way for it to access up to $2.5 billion in capital from a federal financial rescue program.
The Fed said in a statement that it allowed CIT's industrial loan company, CIT Bank, to convert to a state bank in Utah, making CIT a bank holding company.
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CNBC.com |
"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 in accordance with the Bank Holding Company Act and the Board's regulations," the Fed said in a statement.
CIT is one of several commercial finance companies hit by the financial crisis to seek bank holding company status—including GMAC and American Express—to qualify for government equity injections under the U.S. Treasury's $700 billion financial bailout fund.
CIT is seeking some $2.5 billion in capital from the Troubled Asset Relief Program, which requires participating financial firms to be bank holding companies. Bank holding company status also would allow CIT to borrow funds directly from the Fed's discount window.
American Express [AXP
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] won bank holding company status last month, while GMAC [GJM
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], owned by private equity firm Cerberus Capital Management and General Motors [GM
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] has yet to complete a $38 billion bond exchange that would provide it with the equity capital it needs for Fed approval.
The CIT [CIT
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] approval followed the New York-based finance company's debt-for-equity swap last week, which was expected to raise $1.5 billion in regulatory capital.
It also announced a $250 million share sale as a final step of its capital plan.
The Fed said CIT Group has total consolidated assets of $80.8 billion, while the CIT Bank unit would have total assets of about $3.1 billion and deposits of $2.3 billion.
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