Wednesday, July 15, 2009
Reportedly, a struggle had broken out between Treasury Secretary Tim Geithner and FDIC chair Sheila Bair. Geithner favored the rescue, citing dangers to small businesses. Bair opposed extending FDIC credit to the weak firm that many believe could fail without causing major systemic upheavals.
While CIT and U.S. regulators spent worked through the night discussing details of a potential recue, a bank run was underway. Customers reportedly drained hundreds of millions of dollars from the lender in the past few days, drawing down on credit lines they had with CIT. The run seems to have been prompted by news over the weekend that CIT had hired lawyers to prepare for a bankruptcy filing.