New York  - The US government is in serious talks to rescue lender CIT Group, fearing its collapse might trigger another financial downturn just as the sector is beginning to stabilize, the Wall Street Journal reported Tuesday.

The collapse of the century-old firm would be the largest bank failure since Washington Mutual's downfall in September. Hundreds of manufacturing companies dependent on its loans could be pushed into failure. About 1 million small and mid-size US businesses get loans from CIT.

But it is not yet clear what kind of rescue and how expansive the government's efforts will be. The two sides have been in serious talks over the last two days.

President Barack Obama's administration is reportedly weighing the consequences of CIT's collapse against the need to allow some financial firms to suffer the consequences of their own poor decisions.(dpa)