The Federal Reserve should have focused on getting the securitization market working again, as it promised last autumn, to avoid situations like that in which lender CIT Group is now, Steve Forbes, CEO of Forbes, told CNBC Tuesday.
CIT Group has 1 million clients which include big names from the franchisee of Dunkin' Donuts to retailer Dillard's. Analysts fear that its collapse could deal a devastating blow to the economy by cutting off financing even more.
"CIT would have never have been in this trouble if the Federal Reserve had gotten the securitization market working again," Forbes told "Squawk Box."
Banks have now been recapitalized and have three times more cash than they did last September when Lehman Brothers collapsed but "what we have here, in terms of the rest of the market, in terms of securitization… that thing isn't working yet," he added.
CIT got $2.3 billion in bailout cash last year and is in talks with regulators about receiving more government help.