The $750 billion "rescue" plan passed by Congress was supposed to increase bank liquidity to ease the credit crunch and encourage commercial and mortgage lending. Instead, it has already turned into an M&A slush fund. Yesterday, PNC Bank announced that it is buying National City for $5.2 billion, financed by the sale of $7.7 billion in preferred stock to the U.S. Treasury. US Bail-Out Cash Buys Rival Bank [BBCNews].
What this means, pure and simple, is that we — American taxpayers — are now the financial backers paying for banking deal-making. Despite what Paulson may say, it's yet another example of good intentions gone bad. There is no excuse at all for allowing bailout funds to be used for mergers & acquisitions. That does nothing help the mortgage or housing markets or to ameliorate the credit crisis. To top it off, PNC has made an all-cash deal. That's our money and I want it back!!