PNC Bank is showing other banks the advantages of capital infusion component of the Treasury’s TARP plan. They’re buying National City Bank for $5.2b which, it can be argued is fully-taxpayer funded since PNC received $7.7b in Treasury’s first round of bank re-capitalizations. This is exactly what Treasury wanted to happen: for banks to take the money and put it to work in the system as capital to lend or to help the industry consolidate or whatever means keeps markets flowing—and prevents the banks from hoarding their cash.
As banks continue to get funds from Treasury, expect more bank takeovers. As for PNC, they will inherit a loan portfolio they expect $20b in losses from, which Bloomberg reports is 18% of the total loan portfolio. National City was one of the most aggressive lenders of Home Equity Line of Credit funds for the past several years, and their HELOC approval guidelines were very loose.