Ohio Congressman Steve LaTourette has been raising some questions about whether or not Ohio comptroller John Dugan orchestrated the sale of National City by diverting federal bailout money to PNC - money that may have saved National City had it been given to them directly.
LATOURETTE: Something's not right. And if you also look at some of Mr. Dugan's other clients - he represented Bank One, who has now been acquired and is now in the process of acquiring others, his clients seem to be doing well and I think the stockholders and the employees of national city bank deserve an explanation.
But banking experts tell a different story. For starters, they say the FDIC has an obligation to use taxpayer funds wisely, and that means closing banks before they run out of money, and refraining from lending money to banks they don't think can survive. Bill Mahnic, Professor of banking and finance at Case Weatherhead School of Management said on 90.3's the Sound of Ideas that there are indications that National City is in a much more dire condition than previously thought
MAHNIC: For example PNC is going to take National City's mortgage portfolio and write it down another 50 percent on the day of closure. What that signals to me is that portfolio of loans and mortgage backed securities was much more toxic, much more weak than analysts thought it was 2 weeks ago.
And the fact is, it's very likely federal bank regulators, and PNC executives know something the public doesn't, explained Baldwin Wallace professor Kevin Jakes who was also on the program.
JAKES: The only people who are going to have that information are PNC because PNC has gone in there, had a look at it, but the other group of people who are going to know that are the bank examiners who've been in there. They obviously have made some decision that this bank is too sick - too unhealthy and therefore is unlikely to survive in the long term
Mahnic doesn't believe Dugan has the authority to decide which banks get federal funds - that's the responsibility of Treasury Secretary Paulson. Mahnic argues it's not a case of playing favorites.
MAHNIC: I think what the treasury is doing is trying to deploy taxpayers money most effectively, most efficiently and with the best chance of getting that money back plus a profit, so I think the treasury is picking well-managed banks.
PNC has agreed to pay a price of 2 dollars and 23 cents a share - half of what it was valued just a few weeks ago. But even though there is an offer on the table, Both Jakes and Mahnic agree that hardly means it's a done deal. If at any moment any of the 21 other banks who received federal money smells a good deal, there will certainly be other offers says Mahnic.
MAHNIC: If that really is a lowball price, trust me, the market will sniff it out.
And as for the much talked-about job losses - it doesn't look good for National City executives. But the silver lining says Jakes is that there is a lot less overlap between PNC and National City when it comes to lower-skilled jobs - and that may ultimately be a good thing.
JAKES: We may not see the kind of job loss that we would otherwise expect, and there in fact even possibilities that we may see some expansion in some areas along this line.
If the PNC buyout does take place, former National city employess will become part of the 5th largest bank in the country - and one that has a history of making smart financial decision. Creating healthy banks, regardless of where they are headquartered could be the best bet for job security in the future. Gretchen Cuda, 90.3