Banks to use bailout money for more acquisitions
The idea of the bailout spreading of government largesse to banks was to get them making loans. But according to a news item from MSNBC News, at least some of the banks are planning on using the money to buy other banks.
"Several of the banks that have received preliminary approval from the Treasury for investments have said they plan to use some of the money for acquisitions, including SunTrust and Regions Financial Corp., both of which expect to receive about $3.5 billion apiece. Even smaller institutions, like Seattle-based Washington Federal Inc., which announced a $200 million commitment from the government, plan to deploy some of the money to expand its retail franchise through acquisitions."
Now it turns out that that the federal money was used by PNC Financial to make its $5.8 billion purchase of National City. "PNC said it had received $7.7 billion in cash through selling stock to the government under the program." And clearly that money went into the buyout.
What the government says it is trying to do is help the stronger banks buy out the weaker ones. But as one critic notes in the article: "Meanwhile, the smaller institutions that don't get any government support will wind up walking around with a big target on their back."
Is subsidizing acquisitions what the American people or their representatives in Congress thought they were getting into with the bailout bill? Is it government's role to finance the roll-up of the banking industry and to pcik teh winners and losers?
