PNC Gobbles Up National City With Treasury Money

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PNC Financial Services Group (NYSE: PNC) is taking over the ailing National City Corp (NYSE: NCC) owner of the regional National City Bank based in Cleveland. PNC has agreed to pay $5.6 billion with some of the money coming from the US Treasury.

PNC First To Use Government Money in Takeover

We were all “sold” the $700 billion bank bailout bill to “thaw” a frozen bank-to-bank lending environment according to Treasury Secretary, Hank Paulson. He told us if he was allowed unlimited power to solve the problem and given the money, he’d solve the financial crisis buy purchasing the “toxic” assets off the books of bank so they would have confidence lending to each other.

This idea in the last few days was scraped in favor of direct investment in a hand full (nine to be specific) of banks who would get an initial $150 billion with more promised. Banks would not be told what to do with the money.

They could go on a takeover spending spree to gobble up weaker banks…with no requirement to actually lend the money and thaw the bank-to-bank lending crisis.

James E. Rohr, chairman and chief executive officer of PNC, confirming the governments involvement said on Marketwatch,

“We believe this strategic combination will continue PNC’s efforts to build capital strength and shareholder value. We are also gratified that we have been selected to participate in Treasury’s Capital Purchase Program, which has helped to put this transaction on a very solid footing.”

So is our tax payer money going for what we were told it would be used for?

Of course not.

This money Paulson pleaded for and got was always REALLY intended to be funneled to the biggest banks in the country with no restrictions on how it was used.

Is it any surprise then, we now have PNC taking over National City?

Nope.

Will it be a surprise if banks don’t start lending again?

Nope

Why lend money in this risky environment when the money in their minds is better spent taking over their rival banks?

Will PNC Get “Too Big To Fail”?

The problem…

Banks who acted only in their self-interest selling subprime mortgages are the same institutions that got us in this mess in the first place. Handing them billions to act in OUR best interest (use TARP money to start lending again) is just silly.

Yet that’s exactly what Paulson did. Did he really expect the same institutions that went wild on subprime lending to the “right thing” with our billions?

If he did, he’s an idiot. If he didn’t, he’s a crook in collusion with them.

Either way, Paulson acted and now the bank’s are showing him and us what dupes we are. PNC gobbling up National City is the start. Other banks will get the opportunity to rub our stupidity in our faces soon.

When the dust settles, a hand full of banks will own all the regionals, and more power will be consolidated with few companies creating even more “too big to fail” companies.

I thought creating companies “too big to fail” was the number one flaw in our system and one of the major issues regulatory agencies would be addressing.

I guess Hank didn’t get the memo…

Good Luck!