by Laura Conaway

As the clock ticks on lending giant CIT, some observers in the financial industry think the federal government is running a "terrible risk" in letting the company fail, reports NPR's Jim Zarroli.

"I don't think they have a solid handle on the devastation, the impact it would have throughout the retail industry," Michael Cipriani, executive vice president of CIT competitor Rosenthal and Rosenthal, tells Zarroli on today's All Things Considered.

 

Zarroli says the danger stems from the current economic model of retailing, in which apparel companies sell shipments of goods to department stores and then wait 90 days to get paid. The companies typically get loans to cover the time between delivery and payment. The loans allow them to continue production.

CIT is by far the largest and most sophisticated of those lenders, Zarroli explains, leaving retailers few places to turn if it fails. Other traditional sources, like GMAC, haven't been lending as freely during the recession, he reports. If CIT goes under, it could push many already struggling stores into bankruptcy.