PNC, National City deal a glimpse of what’s ahead October 28, 2008
Posted by Jennifer Swartz in : News, Partners , trackbackGovernment-backed merger a model for dozens more in the wings for banking
Pittsburgh and Cleveland, two bitter Rust Belt rivals on the football field, have become the proving ground for the federal government’s controversial $700 billion bid to staunch a credit crisis that has spilled over from Wall Street to Grant Street and Euclid Avenue. Analysts say the $7.7 billion in federal support Pittsburgh-based PNC Financial Services Group received to acquire Cleveland’s troubled National City Corp. is the first of what is expected to be dozens of government-financed acquisitions of weak banks by strong ones. The infusions are intended to restore confidence in the banking system and credit markets.
In short, Treasury Secretary Henry M. Paulson Jr. and other regulators are picking winners and losers, not only among banks but also among stakeholders. “The Fed will not let any bank fail,” said Greg Melvin of C.S. McKee, a Pittsburgh investment manager. “They don’t care about shareholders, but no debt holder or depositor is going to get nicked in the next three months.”
That is how the regulatory script reads for PNC’s $5.6 billion acquisition of National City, announced Friday. And Mr. Melvin, a director at FNB Corp., a Hermitage, Pa. bank, expects more to follow. “What the Fed is telling us is that you can use this money for acquisitions,” he said. “They’ll give you extra capital if you take a bad bank.” Continue reading this Pittsburgh Post Gazette Article.
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