The government is encouraging all banks that receive TARP funds to use the money and not just sit on it. Which is reasonable enough. But the deal for National City by PNC, which was made possible by the $7.7 billion PNC will receive from the TARP, has some misgivings. It seems like more banks will use such funds to expand their footprint. City National Bank of California has suggested that it might use its $395 million injection to acquire banks. So this is quite a boon to the 19 regional banks that will receive funds in the second step of the TARP bank investment program. For community banks, this is hardly an ideal situation; it amounts to healthy banks buying healthy banks with public funds, notes The Guardian. All the while making the local banks even more vulnerable. They would have preferred the recipients of TARP largesse to loan the funds to help the economy. A persuasive point. Small community banks may use their cut of the TARP for just that.

For more:
- here's the article from The Guardian
- here's a Reuters article on community banks

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