Post-Gazette Editorial – 1/5/07

This page was last updated on January 6, 2007.

PNC plays Santa: All of Pittsburgh can celebrate the bank’s success; Editorial; Pittsburgh Post-Gazette; January 7, 2007.

Below is a detailed critique of the subject editorial.

“PNC Financial Services Group is booming in an era when large regional banks have become an endangered species elsewhere. With the bitter aftertaste of Mellon Financial Corp.’s announced departure from Pittsburgh, here is good news at several levels.

“In the third quarter, PNC’s net income rose to a record $1.5 billion. After it closes on its purchase of Mercantile Bankshares Corp., PNC will become the 11th-largest bank in the country.

“CEO James Rohr calls the progress over the last 18 months ‘remarkable.’ Also remarkable was that this assessment came in a note sent to employees explaining a reward: an extra $1,000 in their paychecks. The bonus went to full-time employees who had received favorable performance ratings.

“PNC employs 24,000 people in eight states and Washington, D.C. (7,000 locally), and this bonus surely provided happy holidays for many of them. In an age when financial news often mentions the king’s ransoms paid to corporate executives, it is great to read about a corporation -- a local one, no less -- which in good times remembers to reward the staff that helped the company’s success to happen.

“But the moral of this story is more than Pittsburgh’s largest bank doing the right thing by its employees. It is also about the advantage to having a giant employer who finds Pittsburgh a good place in which to prosper.

“As the Mellon situation should remind everyone, financial institutions can operate anywhere. Pittsburgh was once the headquarters of many corporations, and in a fiercely competitive national environment it is simple common sense to help those that remain.

“Yet this giant has been plagued by local Lilliputians who seek to keep it down. With no common sense but an overdose of ideology, the small-minded continue to obsess because PNC accepted $18 million in tax-increment financing plus $30 million from the state to help build a $170 million skyscraper on Fifth Avenue in Downtown, a particularly blighted part of town.”

[RWC] “[K]eep it down?” Who’s down? As the editorial itself noted, PNC reported a $1.5 billion net profit for the third quarter. This is after PNC reported profits of $354 million and $381 million for the first and second quarters, respectively. PNC reported a $1.2 billion profit for 2004 and $1.3 billion for 2005. In October, PNC acquired Mercantile Bankshares Corporation for about $6 billion in cash and stock.

PNC is doing great and should be congratulated for it.

That said, I guess I qualify as a “local Lilliputian” because I don’t believe in government subsidizing business, whether the business is successful or not.

As far as helping businesses, it’s clear the PG and I have different approaches. I believe we can help the broadest number of businesses – and thus the overall economy – by keeping taxes low for everyone. Wise management of limited government accomplishes this goal.

The PG believes a group of politicians giving other people’s money to the favored few makes sense. As I’ve written before, if politicians were good at picking winners and losers in business, they wouldn’t waste their time in politics.

“Far from being a public giveaway, this was money well spent. TIFs allow local governmental bodies to divert part of the anticipated increased tax receipts from the improved property to pay for part of its development. As we said a year ago, ‘It’s hard to imagine a project more suited to such help from future taxes it will generate.’

“This was an investment made in Pittsburgh’s best interest. Local employees enjoying their $1,000 Christmas bonus will surely understand that and the greater point: The more that major companies are encouraged to stay in Pittsburgh, the more it seems like every day is Christmas.”

[RWC] “This was an investment made in Pittsburgh’s best interest?” How many times have we heard this balderdash? Remember the Lazarus and Lord & Taylor debacles? Let’s also not forget the three North Side restaurants the Sports & Exhibition Authority (SEA) helped build with $1 million from taxpayers. Even with that subsidy, the SEA had to cut the rent paid by the restaurants by more than 50%.

Here’s my point. If building “a $170 million skyscraper” were a wise investment for PNC, PNC would have built the building without a handout from taxpayers. If it was not a wise investment, why should taxpayers “invest” in a risky proposition?