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November 16, 2008

Ohio lawmakers demand info on National City sale to PNC

CLEVELAND (AP) _ Ohio lawmakers are demanding more information about National City's sale to Pittsburgh-based PNC Financial Services Group.

They want to know why National City's application for federal bailout funds was rejected and why PNC used part of its bailout dollars to purchase the ailing Cleveland-based bank. Lawmakers say the sale is an example of the government unfairly picking winners and losers.

The $5.6 billion deal is scheduled for completion by year's end. Even some critics, like U.S. Sen. Sherrod Brown, say it will be hard to stop the sale.

U.S. Rep. Steve LaTourette plans to use a House Financial Services Committee hearing Tuesday to ask the Treasury Department to give $3.5 billion to $4 billion to National City. That's the amount National City could have received under the government's new Troubled Assets Relief Program created by the financial bailout bill passed by Congress.

The bank didn't need that specific sum, since it had $7 billion on hand. But the bailout would have given the bank the Treasury Department's seal of approval, which could have instilled market confidence.

"The way they have this thing set up is wrong," LaTourette said. "They are giving money to very healthy banks, and very healthy banks don't need the money."

On Friday, interim Assistant Treasury Secretary Neel Kashkari testified that National City's application for federal bailout money wasn't seriously considered because the bank was too weak to survive.

U.S. Rep. Dennis Kucinich says National City could have been bailed out along with other banks but was "pushed off a cliff" instead.

Brown says the bank was in trouble but its problems appeared to be surmountable. The bank had a solid base of deposits and the possibility of stability if it rode out its problems with part of its loan portfolio.

Brown is also unhappy with PNC's use of a tax law provision allowing it to take a $5 billion write-off for bad loans it acquires as part of buying National City.

"I don't think there's any real good economic or fair basis for giving those tax breaks," Brown said.

Treasury Secretary Henry Paulson spoke briefly about that tax provision last week, saying in a news conference that it was legal.

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