CIT Update

July 20, 2009

By Gary Wassner for the CFDA

It’s hard to explain to a lot of people what the true impact is now and will be in the future of CIT’s failure to fund apparel manufactures and its inability to guaranty the credit of the stores they ship to. The government clearly doesn’t understand.

All we are hearing is the fact that the failure does not pose a systemic risk. True, the country will not collapse if CIT fails. But small business is the backbone of our country, and the fashion industry is populated by small businesses. These small businesses have grown into the Calvin Kleins and Ralph Laurens and Tommy Hilfigers of today – huge, international companies with thousands of employees around the world.

The fashion design and manufacturing industry in the United States has inspired the world. And it all begins with small business men and women. We are asking for something simple: TIME.

We’d like the government or members of our private banking system, who themselves have taken TARP funds for the very purpose of assisting the flow of capital into the hands of American businesses, to provide the bridge loans that CIT requires in order to continue to fund the entrepreneurs, manufacturers, retailers, designers and other small business owners who depend upon them for their weekly payrolls, their production financing and their protection against catastrophic retail losses through their credit guarantees.

In light of the bondholders decisions over the weekend, we are asking the government to use its influence, based upon the public money that it has lent to our financial system, to insure an orderly sale of the viable assets of CIT, which include CIT Factors, a profitable unit in and of itself, or to open the Fed window to CIT so that it can borrow at competitive rates, in the absence of a private market in which it might normally be able to do so, and to continue on in business. We are asking the government to intervene in order to save the thousands of small businesses that cannot easily find alternative means of financing on such short notice, and who cannot replace the credit guarantees that CIT provides to insure them against retail losses that these small manufacturers cannot sustain on their own. We are asking the government to recognize that without CIT that now, at this very moment in time, there is no short-term alternative for all of these small businesses.

There is no other company who can fill the gap left by an abrupt and disorderly departure of CIT. In this particular instance, the government of the United States has an opportunity to actually apply the philosophy that precipitated the creation of TARP and its related tools for financial assistance. It has an opportunity to save a company that services small businesses – that truly services Main Street, not just Wall Street. If all we do it give public funds to the banking system, and those funds don’t filter down beyond Wall Street, we’ve given these funds for the purpose of putting more money into the coffers of the very same companies that the government spent months blaming for the financial crisis to begin with. Step up to the plate now and give CIT the lifeline it needs to allow for an orderly transition, rather than a chaotic, anxiety ridden collapse that will cause untold damage to thousands of innocent Americans.