The U.S. government’s $160 billion handout to banks from Niagara Falls to Beverly Hills is going mostly to lenders that need it least, putting weaker rivals at risk of being shut down or taken over, analysts say.
The government buying spree has so far targeted two dozen regional lenders, including City National Corp. in Beverly Hills.
One such recipient, PNC Financial Services Group Inc., immediately bought a competitor, National City Corp. Another, Saigon National Bank, had almost four times the minimum level of capital before selling a $1.2 million stake.
“This has the unintended effect of making the strong stronger and the weak weaker,” said Gray Medlin, founder of Carson Medlin Co., a Raleigh, North Carolina, investment bank focused on banking deals. “Banks that are getting bad exams and are under intense pressure from regulators won’t be successful in applying.”
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