Last Updated Oct 27, 2008 10:31 AM EDT
Once a solid, trusted bank, National City saw its stock tumble and big layoffs of its workforce over the past year. Last week, after the federal government officials said they wouldn't include it in its bailout program, the bank agreed to be bought by PNC Finanical Group of Pittsburgh. That's a special irony since the Cleveland Browns NFL team and Pittsburgh Steelers are bitter rivals.
What got National City into such a mess was the aggressive move into mortgages, led by former CEO David Daberko.
I had covered National City and had interviewed Daberko many times in the late 1990s. Back then, he seemed a visionary and wanted to turn profitable National City into a mortgage juggernaut. These were the late Clinton Admnistration years when the economy was booming, the Internet craze was in full swing, and the future looked very, very bright.
National City hadn't dealt much with mortgages, but Daberko got the subprime bug. He bought California-based First Franklin for $266 million in 1999. Soon, half of National City's profits were coming from mortgages. Curiously, PNC, which is to buy National City, dumped mortgages back in 2002, believing them to be too risky.
But Daberko looked smarter still when he sold First Franklin in 2006 for $1.3 billion to Merril Lynch. But the bank still had a pile of risky loans. The stars started falling and the bank didn't notice until it was too late.
Daberko retired from National City late last year with a $46 million payout, although much of that has since been reduced following the dramatic tanking of the bank's stock prices.
New CEO Peter Raskind took over. Incredibly, he was telling reporters as recently as Oct. 15 that he was "optimistic" about the bank's future. Raskind makes about $3.4 million in total annual compensation and it isn't clear what his payout will be when PNC takes over, probably by the first of next year.
Meanwhile, plenty of National City employees are being laid off, a total of one third may be gone with the merger, and loyal company retirees have seen ther 401 (k)s devastated.