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Bailout is corporate welfare

November 13, 2008
The Daily Mining Gazette

Some companies receiving money through the government's program to "bail out" beleaguered financial institutions do not seem to have been in trouble at all. They are using the funds to get bigger and richer through acquisitions of other firms.

We do not believe that is what most Americans had in mind when Congress approved the enormous bailout bill a few weeks ago.

In late October, PNC Financial Services Group announced that it was acquiring National City Corp. for $5.58 billion. At least part of the money for the deal came from $7.7 billion provided by the government.

Earlier this month, Fifth Third Bancorp revealed that it is acquiring the Freedom Bank of Florida - using part of the $3.5 billion provided to it as part of the bailout program.

Both PNC and Fifth Third will grow larger and, presumably, richer because of the deals. Far from bailing out the two companies, taxpayers' money is being used, so to speak, to buy them bigger boats.

Treasury Department officials who are doling out the bailout money probably can make arguments in favor of the PNC and Fifth Third funding. One might be that without the acquisitions, National City and Freedom Bank would have ceased to exist.

But that argument simply isn't valid. Had the idea been to preserve the two institutions, bailout money could have been handed directly to them - used to put them back on secure footings.

As we have pointed out, the bailout bill was rotten to the core even before federal officials began handing out money from it. News that it is being used to enrich a few financial institutions merely adds to the level of disgust many Americans feel about the measure. This is corporate welfare at its very worst.



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