The National Retail Federation (NRF) and the American Apparel & Footwear Association both asked the Obama Administration and members of the U.S. Congress to provide government assistance to CIT Group Inc., saying failure of the major lender could have severe consequences for the retail industry and the nation’s economy.

“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,” NRF President and CEO Tracy Mullin said. “A failure of CIT would impact 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.”

Mullin comments came in a letter to Treasury Secretary Timothy Geithner and Federal Deposit Insurance Corporation Chairwoman Sheila Bair. CIT has applied to participate in the FDIC’s Temporary Liquidity Guarantee Program and said this week it is also pursuing other liquidity solutions.

Mullin told Geithner and Bair that CIT is one of the few lenders who act as a “factor” for thousands of small and mid-sized vendors who supply U.S. retailers with much of the merchandise sold in their stores. Vendors typically accept orders from retailers with an agreement to be paid in 90 days. They then sell their accounts receivable to a factor in order to obtain the short-term financing needed to produce the goods ordered. Without factors, suppliers could be forced to shut their doors or retailers would be required to pay up front and draw down on their own credit lines at a time when credit remains difficult to obtain.

“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,” Mullin said. “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.”

The American Apparel & Footwear Association sent a series of letters to Senator Christopher Dodd, Representative Barney Frank, Treasury Secretary Timothy Geithner, and others that highlighted the pitfalls of allowing CIT to enter bankruptcy.

“In this tough economic climate, U.S. apparel and footwear producers are already feeling a credit crunch,” said AAFA President and CEO Kevin M. Burke. “CIT is a critical financial partner to many of our members, many of whom are small and medium sized businesses and make a substantial portion of the clothing and shoes worn by hard working American families. In fact, for some members, CIT is the only lending source available.”

“If we fail to act, everyone in the supply chain, including the designer, the manufacturer and the consumer, will suffer,” Burke said. “I call upon our leaders in Washington to quickly move and bring aid to a lender that touches every consumer in the United States.”

The AAFA noted that CIT represents 60% of factoring in the U.S. apparel and footwear industry and a disruption caused by a bankruptcy filing could have a crippling impact on manufacturers who would instantly lose credit approval for customers as they enter the critical months of the fall shipping season; not to mention the loss of funding to make payments to overseas manufacturing facilities. It would further weaken the overseas market's confidence in our economy in respect to their ability to obtain timely payment for previously contracted goods.

Both of the letters follow:

July 14, 2009
The Honorable Timothy F. Geithner
Secretary
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Dear Secretary Geithner:

I am writing to urge the Administration in the strongest terms to address the critical situation facing CIT Group Inc. and to ask that you provide all possible government assistance. Allowing yet another major financial institution to go bankrupt would only exacerbate the already severe situation faced by the retail industry and our nation’s economy.

By way of background, the National Retail Federation represents an industry with more than 1.6 million U.S. retail establishments, more than 24 million employees – about one in five American workers – and 2008 sales of $4.6 trillion.

CIT is one of the very few lenders who act as a “factor” for the thousands of small and middle-sized vendors who supply U.S. retailers with much of the merchandise sold in their stores. As you know, a factor provides the short-term financing that allows a vendor to produce goods once an order from a retailer has been received. Without factors, suppliers could be forced to shutter their doors or retailers would be required to pay up front and draw down on their own credit lines at a time when credit remains difficult to obtain. 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.

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. A failure of CIT would impact 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.

I strongly encourage the Treasury Department to take a very close look at the 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.

Sincerely,

Tracy Mullin
President and CEO

XXX

1601 North Kent Street,
Suite 1200, Arlington, VA 22209
www.apparelandfootwear.org p
(703) 524-1864
(800) 520-2262
f (703) 522-6741
July 15, 2009July 15, 2009

The Honorable Christopher Dodd
U.S. Senate
Washington, DC

Dear Senator Dodd,

On behalf of the American Apparel & Footwear Association (AAFA) – the national trade association of the apparel and footwear industry, and their suppliers – we are writing to seek your urgent assistance in resolving the financial crisis involving CIT Group, Inc.

CIT is a critical financial partner for many of our members. CIT's lending activities provide financial support to small and medium sized U.S. businesses, most of whom are privately and family held. There is no level in the supply chain that CIT Group does not touch, from the suppliers of thread and material to the manufacturer, to the retail shelf. It is particularly important for many small American businesses that may not qualify for financing from other sources.

Because of the prominence CIT Group holds as a lender in our industry there is no readily available backup lender. CIT's potential failure would have a devastating effect on our member's operations, which are already reeling from one of the tightest credit crunches in memory.

CIT represents 60% of factoring in our industry and a disruption caused by a bankruptcy filing could have a crippling impact on manufacturers who would instantly lose credit approval for customers as they enter the critical months of the fall shipping season; not to mention the loss of funding to make payments to overseas manufacturing facilities. It would further weaken the overseas market's confidence in our economy in respect to their ability to obtain timely payment for previously contracted goods.

Many jobs in our industry are dependent upon the continued operation of CIT. We urge you to take any steps to ensuring the current viability and prevent the failure of CIT Group.

Sincerely,
Kevin M. Burke
President & CEO
cc: Representative Barney Frank
Treasury Secretary Timothy Geithner
Senate Banking Committee
House Banking Committee