My finance view

Commercial lender CIT Group Inc. confirmed late Monday that it has secured a $3 billion bailout from its bondholders, saving the company from filing for bankruptcy.

It’s a new twist in the financial crisis: A major bank on the verge of a last-minute rescue — only this time the bailout isn’t coming from the government. The deal marks the first time since the banking crisis erupted that private investors are stepping in to save a big firm without federal help or oversight.

CIT said the rescue includes a $3 billion secured term loan with a 2.5-year maturity, which will ensure that its customers continue to have access to credit. Term loan proceeds of $2 billion are committed and available immediately, with an additional $1 billion to be committed and available within 10 days.

The deal suggests the appetite for risk in the private sector is increasing, analysts said. It also could provide a framework for other financial rescues if Washington turns off the bailout spigot.

"You’ve got private money coming in and essentially giving a vote of confidence" in banks’ future profitability, said Vincent Reinhart, former director of the Federal Reserve’s monetary affairs division. "It’s encouraging."

By not getting involved, the Obama administration gambled CIT was not so enmeshed with the financial system as companies like Citigroup, Bank of America and others banks that accepted federal bailout money, analysts said personal loans.

CIT had been in talks with regulators to reach a deal for funding. Once talks with government officials fell apart, CIT turned to some of its major bondholders for help. They struck a deal late Sunday.

The government’s hands-off approach marks a major shift in the crisis. In the past 16 months, the government has poured billions into stumbling mega-banks. But the nation’s biggest banks still enjoy federal support through borrowing or debt guarantees. So how far the government is willing to go with its hands-off policy is unclear.

Scott Talbott, top lobbyist with the Financial Services Roundtable, which represents CIT and other big financial firms, said the government’s seeming pullback from the banking sector was a welcome sign.

"When the government steps in, you disrupt the market," he said. "That was necessary to restore liquidity but distorted the free-market system. Now the exit strategy is becoming clear."

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