The
Troubled Asset Relief Program (TARP)-funded acquisition of Cleveland based
National City Corporation by
PNC Financial Services Group, Inc., of Pittsburgh, will be a template for government intervention in the credit crisis. Len Boselovic of the
Pittsburgh Post-Gazette and Thomas Breckenridge of
The Plain Dealer reported on the $5.6 billion deal in Sunday's
P-G. The U.S. Treasury is supplying PNC with $7.7 billion to support the National City bailout. From the
article:
Cleveland's economy is suffering because National City and other banks have restricted credit, said Raj Aggarwal, dean of the University of Akron's business school. He was stunned by the number of businesses who said they couldn't get credit.
"To me, that's exactly the kind of thing we don't want, as a nation and as a banking system," Mr. Aggarwal said.
In an
interview with the business staff at
The Plain Dealer, National City CEO Peter Raskind was clear that agreeing to the acquisition was a difficult, but necessary decision:
A National City doing business at less than full octane, you've got to question how helpful is that to the community? How helpful is that to employees? That's the frame of reference that I'm thinking about versus a strong and healthy and a perceived to be strong and healthy institution.
Reasonable people could disagree on this. That's why I made the comment that I did. And let me be clear about this, because I haven't actually said this, so I will: I feel terrible about this.
I mean, let's be clear. There's no ambiguity about that. I feel terrible about this. That's why I couldn't get through the employee meeting this morning without stopping every sentence or two. There's no debate about that.
Mr. Raskind isn't the only one that feels terrible about the deal. Quoting again from the
Post-Gazette:
"Without regard to the economic and psychological impact on our community, Treasury made a coldly calculated decision to push National City off the cliff and use our tax dollars to help another bank scrape up the remains," said U.S. Rep. Dennis Kucinich, a Cleveland Democrat who voted against the bailout.
U.S. Rep. Steve LaTourette, R-Cleveland, said Congress should have given Mr. Paulson and other regulators a blueprint on how to use the $700 billion instead of letting the Treasury secretary "play God."
"He has picked winners and losers," Mr. LaTourette said. The first winner he picked was Goldman Sachs, where he came from. ... The chickens have come home to roost in Cleveland in a horrible way."
The addition of National City offices will
expand PNC operations into the Midwest, and make it the fifth largest bank in the U.S.
