CRIMINALIZED CAPITALISM:

TARP retraction could spur deal spree (Eoin Callan, April 01, 2009, Financial Post)

The two men who walked through the doors of the bank branch in Cleveland were both older, neatly dressed and polite.

Claiming to be real-estate brokers, the pair inquired about opening a business account and were given a quick tour.

Suspicion was aroused only after their inquiries strayed beyond the norm to the number of tellers on duty behind the counter.

Then they blundered, betraying total ignorance of local geography, before bolting.

"We knew our cover was blown," said one of the men in a recent interview.

While the pair's identity remains a mystery to staff at the branch, the duo were in fact two of the most senior executives of Bank of Nova Scotia, Canada's third-largest bank.

They were casing the joint as they mapped out a plan to knock off all 1,400 branches of National City in a multi-billion-dollar takeover of the regional U. S. bank.

The plot was foiled when the U. S. government unwittingly erected barriers to foreign takeovers with a series of interventions to protect the country's banking system.

Although inadvertent, the U. S. Treasury scared off many buyers of banks when it agreed last fall to inject US$250-billion into more than 300 banks through the Troubled Asset Relief Program(TARP).

"The TARP money really slowed down the process of consolidation," said Rob Sedran, an analyst at National Bank Financial.

But things may start to change this month when the U. S. is expected to give the healthiest banks a green light to start repaying government funds, and to seek strong partners for those on the sick list.