Media accounts of the Lynchburg oil train fire are routinely misreporting that the tank cars belong to the CSX railroad. In fact, CSX does not own the tank cars. As we pointed out in our train spotting piece, their true ownership is revealed by the markings on their sides, CBTX or CTCX, that are clearly visible in many images.
The Lynchburg tank cars are actually owned by a firm that leases them out, The CIT Group.
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CIT is a financial holding company that has run into trouble in recent years, at taxpayer expense. In 2008, it received $2.3 billion in Troubled Asset Relief Program funds from the federal government to stave off financial collapse. In 2009, The CIT Group filed for bankruptcy, a move that resulted in the US Treasury Department losing the full $2.3 billion.
The CEO of The CIT Group is John Thain. That’s the same John Thain who was formerly the CEO of Merrill Lynch, and who was forced to resign during the height of the 2009 financial meltdown owing to financial irregularities at Merrill. He may be best remembered as the executive who—at the moment his company was being bailed out by US taxpayers—spent $1.22 million to refurbish his office suite, including an $87,000 rug. He also handed out several billion dollars of bonuses to Wall Street bankers at the time.
The derailment, fire, and oil spill in Lynchburg did an unknown amount of damage to the town’s waterfront and the James River. Though CIT is the owner of the tank cars, it is unclear what liability they have for cleanup costs. Yet it is starting to look like being in the business of leasing tank cars, even those built to the newest standards, for shipping explosive crude oil could be a high risk proposition for investors.