CIT Group's orderly bankruptcy filing over the weekend proves that the unthinkable can become thinkable if it happens slowly enough.

CIT, a major business lender, was teetering last fall along with a big chunk of our financial system. The big worry then was that if CIT failed, thousands of its small-business borrowers might go under too.

A $2.3 billion cash infusion from TARP, the government's Troubled Asset Relief Program, bought CIT some time. The government has since refused to add more TARP money, and CIT's Chapter 11 filing means most of the original investment will be lost.

Still, TARP wasn't about making money. It was about preventing a financial meltdown.

"Back then, if CIT had gone down, it would have been a lot more of a headache," says Scott Colbert, head of fixed-income investing at Commerce Trust Co. in Clayton. "This is the way you would rather see a financial institution go: quietly."

He added: "You have the stock market rallying, almost ignoring this news entirely. It shows that $30 billion bankruptcies can be handled."

CIT's shareholders will be wiped out, or nearly so, but few tears will be shed for them. Bondholders will get about 70 cents on the dollar in CIT's proposed reorganization plan, but the bond market has been anticipating such an outcome for weeks.

Most important, credit conditions have loosened to the point where CIT's small-business clients, at least the healthier among them, can find other financing. Retailers once were very afraid of a CIT failure, but an official of the National Retail Federation was quoted Monday as saying that the lender's bankruptcy shouldn't affect the holiday selling season.

Bert Ely, a banking consultant at Ely & Co. in Alexandria, Va., says the prepackaged bankruptcy allows CIT's lending subsidiaries to keep operating. But, he adds, that doesn't mean every small business will get uninterrupted credit.

"There are folks who have maybe been cut off already, because they are potential problems," Ely said. "A lot of these smaller retailers are in trouble anyway. We're seeing a lot of retailers close, and frankly there's a lot of overcapacity in retail."

CIT, which was founded in St. Louis a year after the Panic of 1907, fell victim to another panic a century later. But recessions and panics often put a spotlight on flawed business models, and Colbert says CIT fell victim to a classic banking malady: It borrowed short and lent long, running into trouble when it could no longer roll over those short-term borrowings.

The question now is whether CIT's business model will ever be profitable again. Ely is skeptical.

"The fundamental problem CIT has is that its cost of funds, the money it borrows to finance its lending, is too high," he says. "They have to make a profit going forward. The question is, will they be able to bring down their funding costs enough to do that? That's where the jury is out."

If CIT's future isn't exactly bright, at least some financiers are willing to bet that it has a future. Carl Icahn has made a $1 billion loan to get the company through bankruptcy, and 90 percent of bondholders have signed off on its prepackaged reorganization plan.

A year ago, such support would have been hard to find. When all is said and done, the CIT failure may be the event that shows how successfully our financial system has healed.