had the money not been given to the banks, National City, a very large (top 10) bank would have failed and the FDIC would have been stuck with a lot more in bills than the money that PNC got from the government, which they used for the purchase. Had Wells Fargo not bought Wachovia, it would have failed.
the whole point of “buying into the healthy banks” is to allow them to take over failing banks and preventing the failure. The FDIC doesn’t have the money to bail out something the size of National City or Wachovia.
This was believed by most economists as a much better idea than buying the garbage securities or giving the money to weak banks to shore up.
Gooner – great explanation of the derivitives market and where the recent failure came from.