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Hedge fund manager John Paulson is considering merging CIT Group and IndyMac

By Amarendra Bhushan for CEOWORLD Magazine Updated:September 29, 2009

Hedge fund manager John Paulson is considering merging troubled U.S. finance company CIT Group with failed mortgage lender IndyMac Federal Bank, the New York Post said.

The New York Post also said Sources described a merger between the two banks as one of several of options being bandied about to help fix CIT, which has been buffeted by the financial crisis and nearly collapsed this spring. These sources emphasized that such a merger has not been part of any formal discussions between CIT and IndyMac, but is a plan that some creditors, including Paulson and his hedge-fund firm, Paulson & Co., have floated.

A marriage between the two banks would help IndyMac with its plans to diversify away from mortgages to commercial loans as CIT Group is one of the nation’s biggest lenders to small and midsize businesses. It could also help expand CIT’s deposits.

Some potholes stand in the path of any official proposal. Key among them is a $3 billion lifeline that CIT received in July, which carries a steep 10.5 percent interest rate and is backed by as much as $30 billion in collateral.

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