PNC Financial to Buy National City for $5.2 Billion

Source: Bloomberg News

Oct. 24 (Bloomberg) -- PNC Financial Services Group Inc., Pennsylvania's biggest bank, plans to buy National City Corp. for about $5.2 billion in stock after receiving U.S. Treasury funds.

PNC will pay $2.23 a share, 19 percent less than National City's closing price yesterday, to create the fifth-largest U.S. bank by deposits, the Pittsburgh-based lender said today in a statement. The $7.7 billion of Treasury funding, part of the government's $250 billion plan to recapitalize banks, ``put this transaction on a very solid footing,'' PNC said.

National City, once among the nation's top 10 subprime lenders, joins Washington Mutual Inc. and Wachovia Corp. in submitting to takeovers after losses tied to failed home loans. Cleveland-based National City lost more than $3 billion during the past five quarters, and its stock plunged 88 percent this year. PNC is still profitable.

``It certainly beats having these troubled banks end up being taken over by the government,'' said David Havens, a credit desk analyst at UBS AG in Stamford, Connecticut. ``It's better for just about everybody that you have a private-market solution and the government facilitating to make sure it happens.''

The capital injection is the first in phase two of the $250 billion program for financial companies, a person familiar with the matter said. An initial $125 billion was allocated to nine of the largest U.S. banks.



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and will close a bunch of banks and layoff a bunch of workers. See how that bailout is workin' for the average guy?

This really bothers me. I'm far from being a financial genius; but my gut instincts keep screaming that this is a dangerous practice that could dwarf our current woes.

Please, someone tell me this is a good thing...and why.