The Home Front

LaTourette's Letter to Paulson on PNC-Nat City

By Luke Mullins

Posted: October 28, 2008

Here's the letter that Rep. Steve LaTourette, an Ohio Republican, fired off to Henry Paulson yesterday. In it, the congressman asks the treasury secretary to launch an immediate investigation into PNC's recently announced deal to acquire National City Corp.

bailout ?

Analysts say providers of the $7 bn of capital in April, which counted as equity, are made whole in this transaction with PNC.

Regular long term shareholders receive $2.23 per share, but the April investors are treated to the full return of their $5.00 per share. This is equity? They got 70% of the bank's future earnings for this "rescue" with zero downside risk?

Paying off $3.5 bn in April rescue as debt (roughly the balance per share to bring the rescuers back to $5.00 per share) is a real cost to PNC and a real loss to NCC shareholders. No doubt the "bailout" deal included this neat provision- it was never highlighted-- and what does it say about the quality of Goldman Sachs' advice to NCC if they'd allow this provision in their deal? (They only charged $158 million for this advice)

R Beeman of PA @ Oct 31, 2008 16:41:42 PM

National City

Like most shareholders I recieved a letter from Mr. Raskind, Chairman, President and CEO of National City of actions taken to strengthen NCC's "core banking franchise and future growth and profitability" dated Sept 19th 2008 but mailed to shareholders mid-October, just prior to the proposed sale to PNC and subsidized by the Treasury.

Other positive notes by Mr Raskind included the just concluded $7 Billion dollar capital raise from the April 2008 proposal which became effective after shareholder votes on Sept. 15th, 2008, increase of number of authorized shares of common stock from 1,400,000,000 to 5,000,000,000 and the conversion of Preferred stock, Series G into common shares with the exercise of warrants to purchase common shares.

Mr Raskind also relates "We are continuing to make progress in four key areas that will help National City emerge as a strong company when the credit cycle turns." These included 1)managing down our liquidating protfolios, 2) continuing to strengthen our management team (four high positions mentioned), 3) "our entire leadership team remains intensely focused on managing risk, cutting expenses and improving the profitability and long term value of our company and your investment.",4) "we are continuing to invest in our core banking and wealth management businesses, which are competitively positioned in the markets where we operate and will be the source of National City's growth and profitability moving forward.".

Mr Raskind then sums up the letter:"National City is a strong, stable and well-capitalized company that is well prepared to take on this challenge and continue building the value of our franchise, and with it, a higher stock price and increased dividend."

I get the feeling Mr Raskind was trying to reassure the stockholders while selling the value of the franchise out from under the shareholders. There is little if anything in this or other letters sent since mid summer that would indicate he (Mr Raskind) and the board were contemplating the bargain based sale even below the share price listed on the Dow.

Mr Raskind ends his letter to investors "Thank you for your continued support and investment."

Doug of TX @ Oct 31, 2008 05:38:13 AM

National City

Once again the government and corporations have lied to the taxpayers and investors. The taxpayer bailout was to aid financial institutions in lending to thaw the credit freeze not to aid them in acquiring other institutions. The actions of John Dugan is not a vote of confidence.

of CO @ Oct 29, 2008 14:10:26 PM

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