Treasury has already taken $125 billion of the $250 billion set aside from the bailout to
invest in nine of the biggest banks in the U.S. and is now looking to get the remaining $125 billion deployed into regional lenders who have been
slammed by mortgage delinquencies.
Among those hit hardest are National City Corp., Fifth Third Bancorp
and KeyCorp, all of which announced big losses in their third-quarter
earnings. The most gravely ill, Cleveland-based National City, posted a
fifth-consecutive quarterly loss of $729 million, or $5.86 a share.
National City blamed the skyrocketing losses on an increase in reserves
for mortgage and real estate construction loan losses and said it would
cut 4,000 jobs to save money. Similar woes afflict its statewide rivals
KeyCorp and Fifth Third, who announced losses of $36 million and $56
million, respectively.
The taking of equity stakes has left officials with little time to get
the bailout's original plan of purchasing troubled mortgage-backed
assets from financial institutions rolling. But Paulson has felt that more extreme measures were called for as credit markets locked up at amazing speed.
- George White
See Bloomberg story
See Dealscape post on regional banks
See Dealscape on equity stakes in large banks
After getting the largest banks on board, Treasury Secretary Henry Paulson is reportedly prepping plans for the government to buy stakes in large regional banks as well. The announcement of the plan by Paulson could happen as soon as Friday, an unnamed source told Bloomberg.
