Rep. Steven C. LaTourette of Ohio has asked Treasury Secretary Henry Paulson to launch an immediate investigation into PNC Financial Services's acquisition of National City, which was announced last week.
LaTourette, a Republican who represents the greater Cleveland area—where National City is headquartered—said in a letter to Paulson that he fears Comptroller of the Currency John Dugan may have steered $7.7 billion in bailout funds to PNC, which was a client of his when he worked in the private sector.
PNC Bank was a client of Dugan when he served as a partner at the law firm of Covington & Burling before taking the post as top banking regulator in 2005, LaTourette said in the letter.
LaTourette called it "troubling that the very first regional bank-hand picked for help was a former client of Mr. Dugan, and Mr. Dugan apparently orchestrated the sale of National City Bank to PNC and wanted it done before the end of last week."
PNC announced plans Friday to gobble up the struggling Nat. City for about $5 billion in a deal aided by a $7.7 billion capital injection PNC will receive from Treasury under the broader initiative to inject capital into U.S. financial institutions.
In the letter, LaTourette also said rules of the Troubled Asset Relief Program, or TARP, may have been incorrectly applied to PNC. "I believe PNC was only eligible to receive an amount of bailout money equal to 3 percent of its risk-weighted assets, but the $7.7 billion bailout for PNC is closer to 6 percent," LaTourette said in the letter. "The law stipulates that 3 percent of a bank's risk-weighted assets is the maximum that can be given to any bank under the program rules."