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National City Bank in trouble

Wednesday, August 20, 2008, 2:14 PM

National City Bonds Show Defaults KeyCorp Can't Deny (August 20 – Bloomberg)

Never have regional banks been so disrespected by bondholders.

National City Corp. Chief Executive Officer Peter Raskind says Ohio's biggest lender is the "best capitalized
of all major U.S. banks" after raising $7 billion this year, yet its
bonds show it's at risk of default. Cleveland-based National City's
bonds have plummeted as much as 17 cents on the dollar since June and
yield more than 10 percentage points above Treasuries, similar to Ford
Motor Co. debt. KeyCorp, Comerica Inc. and Fifth Third Bancorp have also tumbled, falling as much as 14 cents.

The
declines underscore growing speculation among investors that the more
than $500 billion of credit losses and asset writedowns sparked by the
collapse of the housing market are nowhere near ending, and there is
little Federal Reserve Chairman Ben S. Bernanke or Treasury Secretary Henry Paulson can do.

"I've been at National City for 30 years and a month and for 29 of those we've seen nothing like it," Thomas Richlovsky,
National City's 57-year-old treasurer, said in a telephone interview.
"In past cycles certainly lending, or credit, has gotten more
difficult. The cost of credit would go up. In this particular
phenomenon of the last year it's not like you can borrow money and the
price went up. No, the market's closed."


The current
crisis is a credit crisis. Period. I don’t really care if the stock
market is trying to signal a bottom, or help keep confidence up; the
real problem is that we have a debt-based money system in which the
engines of debt have stalled out. Bernanke and Paulson are furiously
pulling on the starter cord, but so far they’ve only been rewarded with
a few sputters. Also, if you have any money at National City, GET IT
OUT. It’s now very high on the list of “banks least likely to succeed.”

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