• With the quiet dexterity of a pickpocket, the Treasury is restructuring the American banking sector, and so far the public seems either uninterested or unaware. Because the feds put few conditions on what exactly banks should do with their share of the $700 billion bailout, they’re using it to buy up competitors at an alarming rate--with Treasury’s approval. Last week PNC Financial used federal funds to buy National City, and the CEO of Regions Financial, which accepted $3.5 billion, told the Financial Times that “[t]hese funds, while still strengthening our capital base, will enable us to expand lending and step up acquisitions.” Joe Nocera at the New York Times, in a column I cited yesterday, thinks this is a scandal--and, to the extent that it’s not what lawmakers or the public thought they were buying, it is. At the same time, banking experts seem to think that consolidation is precisely what the industry needs to shore up weaknesses. Which is a dodgy way of saying that we’ll get our loans again, but not until the bankers have fattened themselves at the trough. (Meanwhile, notes Dealscape, commercial paper rates remain exceedingly high, proof that banks aren’t getting any more generous with lending out their money.)
  • Um, also: What? According to the Washington Post, the Treasury is working to expand the bailout’s beneficiaries to include the auto industry. Brad Plumer gets into this in a separate article today, but I for one think this is an awful move. It’s yet another twist that taxpayers and Congress didn’t sign up for. Treasury, of course, is using weasel words to say it’s all kosher: “The law grants the secretary broad authority to purchase troubled assets that he deems important to improving financial stability,” said a spokeswoman. Even if that’s technically true, using the money to bailout another industry undermines investor and public confidence in the plan and the government, confidence it was designed to prop up. If the feds want to bailout carmakers, let them arrange a separate bill.
  • The Mexican legislature is moving toward approval of an oil-sector reform allowing the state-run monopoly, Pemex, to sign performance-based contracts with private companies. It’s been a long time coming, largely because any private role in the sector is (literally) violently opposed by left-wing lawmakers and the unions. It’s also desperately needed: Thanks to the current structure, Pemex has no incentive to find new fields, even though Mexico relies on oil for some 40 percent of its budget. As a result, proven reserves will run out in nine years, while experts believe that undiscovered reserves could add another 20 years to the country’s output. If John McCain and the Republicans were serious about expanding American access to “safe” oil, they’d be talking about helping Mexico get its oil sector moving.

--Clay Risen