The National Retail Federation (NRF) has appealed to the Obama Administration to provide government assistance to the CIT Group Inc. NRF stated that the collapse of the major lender could have severe repercussions for the retail industry and the US economy.



NRF President and CEO Tracy Mullin said: “If the criterion for whether a financial institution should receive government assistance is whether it is ‘too large to fail,’ CIT is most certainly too important to the retail industry to be allowed to fail, and the retail industry is too important to the economy to be placed under additional stress.”



She added: “A failure of CIT would impact on thousands of retailers and, consequently, the consumer spending that makes up two-thirds of our nation’s economy. That cannot be allowed to happen at a time when retailers are already struggling to survive the national recession.”



CIT has applied to participate in the FDIC’s Temporary Liquidity Guarantee Program and it stated that it is also pursuing other liquidity solutions.



Mullin told Treasury Secretary Timothy Geithner and Federal Deposit Insurance Corporation Chairwoman Sheila Bair that CIT is one of the few lenders who constitute a “factor” for thousands of small and mid-sized vendors who supply U.S. retailers with much of their merchandise.



Vendors typically accept orders from retailers with payment to be made in 90 days. They sell their accounts receivable to a factor in order to obtain the short-term financing required to produce ordered goods. Without factors, suppliers may be forced to shut down or retailers may have to pay up front and draw on their own credit lines at a time when there is a credit crunch.



Mulin warned: “If CIT were to fail, a chain reaction would be set off that could very well leave retailers with a shortage of merchandise during the crucial holiday season this fall. I strongly urge the Administration to take a very close look at the important role CIT plays in the retail industry and act appropriately to ensure that this essential lending institution remains economically viable. The jobs of countless hard-working Americans are at stake.”