With CIT in bankruptcy, U.S. is faulted for investing in weakened companies

Taxpayers on hook as some bailed-out firms prove frail

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NEW YORK—A year ago, the financial system was tottering and government officials arranged a $2.3 billion emergency cash infusion into CIT Group, a troubled lender to small businesses.

Today, CIT is in bankruptcy court, and the taxpayers’ investment is on the brink of being wiped out. It would be the largest loss so far from the government’s massive rescue of the financial system, but it isn’t likely to be the last.

Officials poured about $700 billion into investments in scores of companies, from giants such as the automaker General Motors and the insurer American International Group to smaller regional banks. Of them, 46 had missed required dividend payments to the government as of the end of September, according to the inspector general overseeing the program.

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