National City Next?

As the investment and money center banks go the way of the dinosaurs, with Goldman Sachs and Morgan Stanley monopolizing deposit banking, all eyes now turn to see who among the regional banks will fail next. In the horse race that no one wants to win, many are putting their money on National City Corp, and the bank worked hard to impress with its shares falling 25 percent in today’s bloody rout. Witness:

Eighteen percent of National City’s loans are “problematic.”

These are mostly subprime and home equity loans given to homebuyers to use as down payments.

We’re also learning today that National City is considering selling millions of dollars in loans to the U.S. Government.

But there are some big questions today.

Will the government buy the loans and for how much, and will there be any strings attached to the buyout?

However a National Bank Rating firm said because the company began stockpiling liquidity and capitol that will give the company some financial cushion and allow National City to survive any further financial problems.

National City needs a parachute, not a cushion, unless you really think the 18% problematical loans is going to go down. With the national banks on the prowl to become too big to fail, National City Corp has fallen 86% and can’t get up.

National city Corp., Ohio’s biggest bank, rose in New York trading after the Wall Street Journal reported the company is in discussions with a number of suitors about a possible sale.

National City advanced 14 cents, or 6.4 percent, to $2.37 at 11:26 a.m. in New York Stock Exchange composite trading. Pittsburgh-based PNC Financial Services Group Inc. and Bank of Nova Scotia, based in Toronto, are among the potential buyers, the Journal said.

Rumors can be a lot like White House leaks. In 2003 President Bush was outraged when it was leaked to the press that he intended to attack Iraq. It was later revealed that the leak came from the White House only to act as a political thermostat.

So now comes National City Corp and some high profile suitors. What could they be seeking? Could they want the 18 percent troubled loans, the losses tied to Fannie Mae and Freddie Mac, or perhaps the capital cushion that management deludes themselves into believing will carry them through the credit crunch?

The Wall Street Journal did the heavy lifting today, but to find the source of any rumors involving an acquisition of National City Corp, turn your eyes first toward the target.