PNC Financial Services Group Inc. and four other Pittsburgh area banks are among more than 50 banks across the country selling or offering stakes to the U.S. Treasury after Secretary Henry Paulson's original plan to buy troubled assets failed to stabilize the financial markets.
Bankers had to apply by Friday for what's left of the $125 billion aimed at smaller lenders in Paulson's $250 billion plan to recapitalize financial companies by buying preferred stock. More than $46 billion has been allocated to at least 36 companies in the capital purchase program, ranging from $7.7 billion for Pittsburgh-based PNC to $1.2 million for California's Saigon National Bank. As of yesterday, applications for at least another $1.7 billion had been disclosed.
In addition to PNC Financial, four other banks either based in the Pittsburgh region or with strong local ties applied to the Treasury.
Parkvale Financial Corp. had disclosed it was considering the sale of preferred shares, between $10.6 million and $31.7 million, according to a Nov. 3, filing with the Securities and Exchange Commission.
"We did apply, for $32 million," Parkvale Chief Financial Officer Tim Rubritz said yesterday, adding that the Treasury gave Parkvale no timetable for giving it a thumb's up or down.
Bank of New York Mellon Corp. was among the nine original signees to take part in Treasury's program, selling $3 billion in preferred shares.
Cincinnati-based Fifth Third Bancorp is hoping to sell $3.5 billion in preferred shares to the Treasury, while Huntington Bancshares of Columbus, is seeking to sell $1.4 billion in preferred.
First Commonwealth Financial Corp., of Indiana, Pa., rather than go the federal government to strengthen its capital position, went to the public markets, selling $115 million of common shares. "We are very pleased to have completed a successful offering of common stock amidst incredible market volatility and economic uncertainty," First Commonwealth CEO John J. Dolan said in a statement.
The infusions are a more practical approach than the aborted plan to buy mortgage securities with the $700 billion Troubled Asset Relief Program, company officials and analysts said. The KBW Bank Index fell 38 percent since Sept. 19, the last day of trading before Paulson's bailout was introduced. No distressed assets were ever bought by the time the original idea was abandoned, Oppenheimer & Co. analyst Terry McEvoy said.
Buying assets takes time and the Treasury's capital purchase program is a "much easier way" to help the banking system, said William Sweet, a partner in the Washington office of law firm Skadden, Arps, Slate, Meagher & Flom LLP. The government is giving closely held banks more time to apply, and "there is no deadline for them yet," American Bankers Association spokesman John Hall said yesterday.
Paulson, who sold TARP as a way to rid balance sheets of hard-to-trade mortgages, said in a speech this week that the bailout hasn't delivered the promised stability. Buying "illiquid" mortgage-related assets -- the reason the program was established a month ago -- is no longer being considered, Paulson said.
"The original plan was a good plan," Paulson said Thursday. "That was valid when we suggested it, it's still valid today. What changed was our understanding of the magnitude of the problem."
Paulson said buying preferred shares was the best way to use "big but finite" funds to achieve the most impact.
PNC spokesman Fred Solomon said in an e-mailed statement that the company "had not announced any need or intention to sell troubled assets under TARP."
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